Microsoft has revealed plans to unbundle Teams from Office 365 in Europe following pressure from Slack and the European Union (EU).
Slack had accused Microsoft of anticompetitive behaviour because the vendor includes Teams in its subscriptions for free, rather than charging extra or giving enterprises the ability to buy Office 365 without Teams.
The EU’s investigation was confirmed in July after months of swirling rumours.
Microsoft’s new approach, which covers the European Economic Area (EEA) and Switzerland from October, will see Office 365 subscriptions reduced by €2 per user per month with Teams excluded. Enterprises will be able to buy Teams separately for €5 per user per month.
Existing businesses stay with their current package or move to the new model.
Microsoft said the changes are largely targeted at its “core enterprise customers”. Office 365 E1 E3 and E5 licences, along with Microsoft 365 E3 and E5 licences, will no longer be available in the specific regions.
Microsoft added that businesses looking at SMB-focused packages will also be given a “without-Teams option”. Full details of the changes are available here.
Speaking to UC Today about the news, Patrick Watson, Head of Research at Cavell, said: “In our enterprise research study, from 2022, 32 percent of organisations cited Teams’ position within Office 365 as their main reason for its selection as a collaboration tool.
“It almost seems strange to expect Microsoft not to use the strength and coverage of its wider portfolio to amplify Teams’ adoption and make it more attractive as a collaboration tool.
“However, the horse has already bolted. Teams has witnessed huge growth, assisted by the pandemic and enforced working from home, so it looks like it’s too late for any other platform to catch up in terms of market reach.
“Slack needed this news three years ago.”
Meanwhile, Microsoft MVP and Empowering.Cloud Co-Founder Tom Arbuthnot, said: “It is interesting to see Microsoft react so quickly to this investigation.
“For customers choosing not to use Teams a €2 PUPM price reduction will be appreciated, I’m sure.
“For new customers, I’m not sure they will appreciate being charged €5 PUPM for Teams, which is up €3 on the old bundle cost. Fortunately, it looks like existing customers can stick with the Teams bundle SKU if they prefer.”
Playing Nicely With Others
Alongside the licensing changes, Microsoft revealed plans to appease its competitors. It said it will create “new mechanisms” that will let other vendors host Office web applications in their own apps, in much the same way it’s possible to open Word documents in Teams,
Microsoft said that this is already possible, but it’s “heard requests from competitors of Teams that they would like to rely on Microsoft’s functionality instead of building their own”.
It also said it would build more resources to improve the interoperability services it offers but did not go into detail about what this would entail.
On the interoperability moves, Arbuthnot added: “Microsoft’s response to allowing more interoperability is to provide more API documentation and allow embedding of Office apps in other providers’ solutions.
“I’m sure the embedding is welcome, but I expect other UCaaS providers would like to see more API integration capabilities.
In a blog post announcing the news, Nanna-Louise Linde Vice President of Microsoft European Government Affairs, said: “We believe these changes balance the interests of our competitors with those of European business customers, providing them with access to the best possible solutions at competitive prices.
“We also recognise that we are still in the early stages of the European Commission’s formal investigation.
We will continue to engage with the Commission, listen to concerns in the marketplace, and remain open to exploring pragmatic solutions that benefit both customers and developers in Europe.”
How Did We Get Here?
It’s been a long road getting to this attempted appeasement from Microsoft. Last month, European officials launched a formal investigation into Microsoft’s bundling of Teams with Office 365, questioning its competitiveness. The journey leading up to this point has been marked by business rivalries.
The saga began in 2017 when Microsoft bundled Teams with Office 365 to replace Skype for Business. Discussions with EU regulators about this practice began in 2020 during the pandemic-driven remote work surge.
Slack, a fierce rival of Microsoft, filed a complaint in July 2020, accusing Microsoft of anti-competitive behaviour by forcing Teams onto Office subscribers and obscuring its true cost. This move led to an EU investigation that started in October 2021.
Amid mounting pressure, Microsoft tried to reach compromises to avoid formal proceedings. They offered to reform cloud practices and even stopped automatically bundling Teams with Office. However, these efforts were deemed inadequate by the European Commission. Negotiations failed to bridge the gap on pricing between Office with and without Teams, leading to a breakdown.
This isn’t the first time Microsoft has faced antitrust issues. In the past, they dealt with accusations of bundling Internet Explorer with Windows and were fined for not adhering to agreements.
Microsoft’s history includes regulatory hurdles, like the attempted acquisition of Activision Blizzard, blocked by the UK’s CMA before Microsoft reworked the deal.
Its most famous legal battle occurred in the early 2000s in the USA when it looked like the vendor would be broken up before a settlement with the Department of Justice kept it in one piece.
