Microsoft Has Just Decided To Gut Business Software Investment In US GDP – Forbes

WASHINGTON, DC – JULY 10: Microsoft CEO Satya Nadella gives the ‘Vision Keynote’ speech during a Microsoft Inspire event at the Verizon Center on July 10, 2017 in Washington, DC. (Photo by Mark Wilson/Getty Images)

Microsoft has announced its new pricing plans for Office 365 and various packages containing Windows 10 and so on–this is going to gut business software investment as a percentage of gross domestic product, a number that we do look at pretty closely as a determinant of how rich the US is going to be in the future. I should at this point emphasise that there’s absolutely nothing wrong with this, this is a statistical change, something which is a result of how we compile GDP numbers, nothing else. It’s not actually going to make a difference to how rich we all are in the future, not this specific change. But it is going to make a very large difference to how some people would predict we’re going to do in the future.

So, really, this isn’t about Microsoft and its charging policies at all, it’s rather something that Wassily Leontief pointed out. To understand what economic statistics are telling us we’ve got to really understand what they are, how they’re compiled and why the underlying economy might have changed so that they’re not telling us today what we thought they used to be saying. This specific change is not just idle speculation either. It will hugely affect a number that Goldman Sachs was using only a couple of years ago as a predictive tool. Getting this right is also useful in considering those claims of secular stagnation from the likes of Larry Summers.

Just for emphasis again, no blame attaches to Microsoft about this, it’s people reading the numbers who need to take care here.

So, consider how we all used to buy our software. Think of Windows and Office, just to keep it simple. We would buy a machine and they would be pre-loaded. Or at larger companies perhaps there would be multi-year site licences. OK, that’s fine. Now, here’s the new systems:

Microsoft is squishing its major biz products into a single solution called – wait for it – Microsoft 365, CEO Satya Nadella announced at Inspire, Redmond’s annual event for businesses that flog its wares. Not a single chair was flung, we can report.

Office 365, Windows 10, and enterprise mobility and security, will be peddled in two flavours: Microsoft 365 Enterprise and Microsoft 365 Business, Nadella said. The latter, which adds device and licence management from a single location, will be available for preview on August 2.

That all seems fairly minor, doesn’t it? In more detail, from the Microsoft pages:

We are introducing two Microsoft 365 offerings today. Microsoft 365 Enterprise is the evolution of our highly successful Secure Productive Enterprise offering, and includes Office 365 Enterprise, Windows 10 Enterprise, and Enterprise Mobility + Security. It’s designed for large organizations and empowers employees to be creative and work together, securely.
Microsoft 365 Business, available in public preview starting August 2, is designed for small- to medium-sized businesses with up to 300 users and integrates Office 365 Business Premium with tailored security and management features from Windows 10 and Enterprise Mobility + Security. It also includes a centralized console for deploying and securing devices and users in one location.

OK, corporate speak, yadda, yadda, but this is the change:

Microsoft 365 Business $20 user/month

Business is the offering for fewer than 300 users, Enterprise for more. I’ve been on to Microsoft PR but after a couple of days they’re still not able to confirm to me that Enterprise will be a per month per user price. I wasn’t even asking what that price might be, just the structure, but apparently that’s not going to be public knowledge just yet. Sigh. However, I think it’s fair enough to conclude that that’s the way it’s going to go, a monthly per seat fee. Even if not my basic point still will stand, just the Business offering is enough for that.

At which point you’ll be wondering so what? Well, a part of the case for secular stagnation is that we don’t seem to be seeing much business investment out there. Another way to make a very similar case is to do as Goldman Sachs did. To ponder whether we really are in the middle of some white hot technological revolution or not. If we are, we tend to think that it’s in software, the internet, cloudy stuff and all that. So, if that revolution is taking place then we should be seeing rising business investment in things software, cloudy, internety and so on. But, we’re not. The third chart on this FT page shows what they were talking about.

Investment in software as a percentage of GDP has been roughly static as a percentage of GDP since 1999 or so. We can then run this argument back and say, well, if there’s no great rise in software investment–and note that this is business investment, that’s what we’re really counting, as a result of the way we compile the figure–then we’re not having a technological revolution and thus secular stagnation! Larry Summers is, as ever, more subtle than this but this evidence is a very partial part of his case.

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