Comparing Microsoft Office to Office 365

With Microsoft offering cloud-based and installed versions of its popular office suite, users must decide which is right for them. We look at where the two versions overlap and diverge, and when each might make sense for your organization.

Long the standard-bearer of office and productivity suites, Microsoft Office is nearly ubiquitous, and its tools—including the most popular, Word, PowerPoint, and Excel—have become shorthand for the types of software they represent. With the newest version of its software, Office 2013, Microsoft has begun to more heavily promote use of Office 365—a distinct edition which moves the Office suite away from single-user software installed on desktops and into multi-user services accessible via the cloud.

Cloud-based solutions aren’t new. Most people using computers are already using some cloud services, including social media, email, storage, or databases, and many even use cloud-based productivity tools such as those offered by Google. Now that Microsoft is offering a cloud-based suite as well as the traditional desktop version, which should you choose?

Office 365 offers a number of advantages over the installed package, as well as a few disadvantages. In this article we’ll take a look at both.

Getting to Know Office 2013

With Office 2013, Microsoft now offers three different versions of the suite, and users have the choice between different “editions,” as well. We’ve summarized them in this section, as well as described their look and feel to help you better understand your options.

Comparing Versions

The software comes in three different versions, summarized below:

  • Free Web Apps. Each of the four core tools that comprise Microsoft Office 2013—Word, Excel, PowerPoint, and OneNote—is available as a free web application version through SkyDrive, Microsoft’s cloud storage and file hosting site, which provides 7 GB of free storage to subscribers. These streamlined versions of the tools allow you to open, edit, and save documents in the cloud, much Google Drive’s apps ( In addition, a free, stripped-down version of Outlook is available as a web-based email client to replace Hotmail, which Microsoft phased out in 2013.
  • Traditional Desktop. Office 2013 is available in a familiar, traditional desktop version that users purchase and install on their computers. Unlike previous versions, however, Office 2013 licenses can be installed on just one computer at a time.
  • Office 365. The name Office 365 refers to a version of the suite that users purchase and install on their machines just like the desktop version—it still works offline without an internet connection—that offers additional online functionality and accessibility. It includes the full version of Outlook, additional online storage through SkyDrive, and online versions of the suite accessible through Office On Demand, which allow users to make use of the tools from anywhere with an internet connection on any device.


In terms of look-and-feel, the traditional installed version of Office 2012 and Office 365 are nearly identical, though those using tablets will notice a slightly different interface and layout optimized for touchscreens. Microsoft redesigned the application since the last release, Office 2010, and Windows 8 users will find its greater emphasis on blank space and large toolbar buttons familiar.

The controversial tool “Ribbon” first introduced in Office 2003 is still around, but users have the option of hiding or even disabling it. Overall, the new interface is fairly streamlined and uncluttered, though Office 2010 users may feel that the new priority given to toolbar space comes at the expense of document space.

User Editions

Users have a choice of editions of Office 2013. For the installed version, the lower-cost Office Home and Student includes the four core tools (Word, Excel, PowerPoint, and OneNote); the more-expensive Office Home and Business adds Outlook; and the most expensive version, Office Professional, adds Publisher and Access.

Those who choose Office 365 have the option of the Home Premium edition, which includes the same package as Office Professional;Office 365 University, which includes all seven tools; and a number of business editions ranging from small business to enterprise versions with varying features and prices (compare all the business editions at In addition, Office 365 gives users 20GB of Microsoft SkyDrive online storage and an hour of calling each month on Skype.


The main functional difference between the installed versions of Office 2013 and Office 365 is the licensing, or number of computers on which the suite can be installed.

The installed version provides a license for a single computer, making it more appropriate for an individual consumer than for use by a nonprofit with multiple staff members and computers. Microsoft will allow users to transfer the license to another computer, with a limitation of once every 90 days (exceptions are available for computer failure or loss). Office 365 Home Premium, however, includes licenses for up to five devices at any one time, including any combination of PCs running Windows 7 or 8, most Macs, and certain Windows tablets. The product is Microsoft’s effort to meet the needs of households or organizations using multiple platforms—for example, an individual user with a desktop, laptop, and tablet. Office 365 University includes licenses for up to two PCs or Macs and two mobile devices, and the various business editions allow for differing numbers of users ranging from 25 to unlimited.

Office 365 users also get access to Office on Demand, essentially a cloud-only version of the full suite which lets them access an online version of the tools from any Windows computer whether or not the software is installed on it—as long as there’s an internet connection.


Another consideration for potential buyers to make is how each version handles the upgrade cycle. Office 365 users are automatically upgraded as soon as new versions come out, while users with the single license installed versions must buy new software if they want the latest upgrade. (Note that, since Microsoft staggers releases of Office for PC and Mac, new Office 365 subscribers on PCs will receive Office 2013 while Mac users will receive Office for Mac 2011 until the 2014 upgrade.)

The upside is that updates and upgrades are easier; the downside is that you lose the option of choosing to not upgrade. Why might you choose not to upgrade? Forced upgrades might mean additional training on new versions, or a learning curve for staff members with each new release. They can also be a daunting prospect for users who remember the backlash against some of Microsoft’s earlier changes, like the 2007 introduction of the Ribbon bar, and most recently, Windows 8’s touch-centric Metro user interface, which is ill-suited to keyboard and mouse users.

However, Microsoft recently reintroduced the Start button in a limited fashion and addressed other user complaints about the new interface, giving the impression the company is becoming more responsive to customer feedback.


The single-license installed version of Office 2013 is a one-time purchase cost, while Office 365 is priced with a subscription model—users pay annually and receive expiration warnings; if the subscription is allowed to end, the suite reverts to a read-only state that lets users view existing documents but not edit them or create new ones. The pared-down web applications are free.

Single-license versions of Office 2013 start at $139 for the Home and Student edition. The Home and Business edition costs $219.99 for a single license, while Office Professional costs $399.99. Installed versions do not expire and can be used indefinitely.

An Office 365 Home Premium subscription costs $99.99 per year, can be installed on up to five devices, and includes the full suite of seven tools plus Office on Demand, 20GB of SkyDrive storage, and the monthly Skype world minutes. Office 365 University costs $79.99 for a four-year subscription, and the business editions range from $5 to $20 per month depending on features and number of users.

How to Choose

Office 365’s pricing and features will likely be a great bargain for many users, but that may not be enough to sway everyone away from the installed version. Here are a few recommendations for when to choose Office 365 and when to opt for Office 2013.

  • “I don’t want to pay for a subscription for something that I used to pay for once.” Office 365 is one of Microsoft’s early steps into the Software-as-a-Service (SaaS) model, which is becoming more common but is still new or unfamiliar ground for consumers used to purchasing physical copies of software and installing it themselves. That’s why Microsoft offers the choice. While a single license of Office Professional costs four times the initial cost of Office 365 for the same suite of tools, it is a one-time cost, and within four years Office 365 subscribers will have spent the same amount. Any use you get out of it after that is a cost-saving, and if you don’t need to upgrade to each latest-and-greatest release, four years is a more than reasonable lifespan.
  • “I need Office for my whole family.” It’s becoming commonplace for families to have multiple computers—maybe even one for each family member. This is the demographic at which Office 365 is clearly targeted. At $99 per year, you get a version of Office for five computers, and each user can save his or her personal settings. To do the same with Office Professional, you’d have to spend $2,000. And recognizing that families are often “agnostic” when it comes to operating systems, Office 365 works on both PCs and Macs.
  • “I travel a lot and need to get work done.” In addition to working on certain Windows smartphones and tablets, Office 365 also allows users to access the full suite of tools from any computer using Office on Demand, as well as the files they store on the included 20 GB of SkyDrive storage space.
  • “I always want to have the most up-to-date software.” Because Office 365 is provided as a subscription service, users automatically receive the latest updates and versions.
  • “I’m happy with Office 2007/2010.” Office 2007 still works fine for many users’ needs, and Office 2010 is only three years old—for many organizations, there’s no good reason to upgrade to the latest version of the software.

While these scenarios can offer you a little guidance, ultimately the decision comes down to your particular situation, your budget, and your needs.

Office 365 marks Microsoft’s transition from software vendor to a cloud-based services provider. As such, the company’s marketing has heavily favored the subscription-based product over the more traditional single license version, leading many bloggers to speculate that the days of owning software rather than subscribing, or renting, are numbered. To those users already familiar or comfortable with the SaaS model, this might be a welcome change; others might feel differently.

Most users, however, will make their choice based on price and features rather than delivery method—and armed with this knowledge about the various options and editions, you’re now prepared to do the same.

Thanks to TechSoup for providing the financial support for this article, and to the following nonprofit technology professionals for their recommendations, advice, and other help:

AnnMarie Santamarina, TAHAS Technologies

Larry Velez, Sinu

Howie Berger, Chairman, Candlewood Lake Authority

Robert Weiner, Strategic Technology Advisor

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