Microsoft, Google Partners Have Plenty To Say About UBS Productivity App Report – CRN

Partners of Microsoft and Google took issue last week with a UBS report asserting that Microsoft may see seat growth deceleration and declaring Microsoft the king of productivity applications.

Microsoft has such a dominant share of employee productivity software—including its Word, Excel and Teams applications—that UBS said “the longtime battle with Google G Suite/ Workspace is now effectively over.”

“Our checks argue that the Google Cloud leadership has all but given up on the goal to displace Microsoft Office 365 in the enterprise segment and has instead shifted its efforts to boost GCP’s competitiveness against Azure,” according to the report.

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Microsoft Vs. Google Productivity Apps
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UBS Report Says The Battle Is ‘Effectively Over

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The report continued: “We now believe that it is prudent to begin modeling a gentle deceleration in commercial Office 365 seat growth given the combo of the pandemic/work-from-home boost fading and Office 365 penetration into the broader Office installed base now reaching 80 [percent], offset by strong E5 traction and the price increase,” according to the report. “For FY23, we’re lowering our commercial Office 365 revenue growth estimate from 19.1% to 17.4%.”

According to the UBS report, the lack of growth acceleration over the past two or three quarters despite a shift to more expensive E3 and E5 products has “been slightly disappointing.” A seat mix shift to smaller businesses and front-line employees—which has less average revenue per user—offset the E3 and E5 gains.

The UBS report also questions Microsoft’s recent price increases for different products. Microsoft increased prices on multiple Microsoft 365 products in March and announced an upcoming price increase for products aimed at nonprofits.

“The number of pricing moves is intriguing, begging the question as to whether this is offensive (Microsoft is leveraging its strong competitive position) or defensive (potential seat growth deceleration),” according to UBS. “We are now tilting towards a view that the timing of these Office price increase(s) is correlated to a likely deceleration in seat growth in the coming fiscal year.”

Although it wasn’t directly mentioned in the report, a 20 percent premium on month-to-month commitments has notably angered multiple Microsoft partners.

Here are what partners had to say to CRN about the report and state of productivity applications.

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