The new version of Office is a huge shift for Microsoft - here's why

Today, Microsoft Office 2016 comes out for Windows 7 and later, bringing with it a slew of new capabilities and features.

Office 2016's headlining changes are mainly focused around helping users work with each other between the desktop, browser, and mobile apps. There aren't a lot of surprises, especially since Office 2016 has been available in beta form since early this year.

But the biggest surprise is how Microsoft is now thinking of Office. As recently as 2013, Office was a big new product that companies and consumers were supposed to buy every release or two.

This time, Microsoft is making it clear that it's going to keep releasing tiny updates and experimental apps on an ongoing basis. This, combined with the way Microsoft has priced it, means it makes more sense to subscribe Office 365 - and get updates like Office 2016 for free - than it does to buy the new packaged product.

Office is irrelevant. Long live Office 365.

First, what's new?

The new Word 2016 lets users collaborate with each other directly from within the document, Google Apps-style. Meanwhile, a new integration with Skype for Business in all of the desktop Office apps means that it's a lot easier to stream your screen to a colleague or just start a video chat.

Otherwise, the updates are nice, but not game-changing. For instance:

• An upgrade to Microsoft Outlook lets it intelligently sort your inbox, a little like Gmail's priority inbox or the stellar Outlook for iOS.
• Excel gets new chart types, as well as the ability to publish data directly to Power BI, Microsoft's business analytics tool and a big focus for the company. A new tool called "Smart Lookup" lets you grab data from Bing or Wikipedia directly from a sidebar while editing a document, kind of like Google Apps does.
• If you subscribe to Office 365, you get a new "Groups" feature where you can throw a team together in Outlook 2016 with a shared calendar and dedicated cloud storage for project files.
• A "recently used" documents prompt in the toolbar that shows the last Office document you were working on, no matter which device.

Enterprise customers of Office 365 are also getting some new data-loss prevention tools to make sure unscrupulous third parties aren't intercepting any data.?

A push toward subscriptions

The real change is in how Microsoft thinks about Office updates for the future.

The last major version of Microsoft Office for Windows, Office 2013, was released over two and a half years ago. Just this past summer, Office 365 subscribers got access to Office 2016 for the Mac - but before that, the last version was released in 2011.

But you won't have to wait that long for cool new features in Office 2016.

"With this release, we're also shifting the cadence of Office on Windows to feel much more like the cadence we have on the Office mobile and web apps, which release every month with new value," writes Microsoft's Office VP Kirk Koenigsbauer in a blog post.

That's right: He said Office on the desktop is going to get lots of new features every month. You won't have to wait two or three years for the next version.

For instance, Koenigsbauer's post promises that "in the coming months," Cortana, the digital assistant that comes with Windows 10, will get the ability to search and read your Outlook e-mail - you know, like "Hey Cortana, what was in that last e-mail from Bob?"

From there, the plan is to make Cortana smarter over time, so she can look at your Office data and make half-decent predictions and issue alerts. This has the nice added side-benefit of making Office more useful on Windows 10, giving an additional incentive to upgrade.

Subscriptions win on price, too.

You can get Microsoft Office 2016 for Windows and Mac as one-time, boxed software releases just as you've always bought them if you really want to. The Home & Student edition is $149, and Home & Business is $229.

But for their $6.99-plus a month, Office 365 subscribers can get the full versions of Microsoft Office 2016 for the desktop right now, plus the promise of these rolling upgrades, for as long as you keep paying.

It's been a successful sales pitch for Microsoft so far, with Office 365 actually cannabalizing sales of the boxed version of Office.

Making the money make sense for Microsoft

In the short term, the new focus on subscriptions has been a painful transition for the company.

But in the long term, Microsoft stands to make a lot of money - the subscription-based model can earn up to 80% more cash over the lifetime of each customer. Plus, since you get access to smartphone apps and Mac versions of the software, too, it re-positions Office as the center of the company, as Windows becomes less relevant in the broader market.

Plus, Office 365 has proven to be an effective vehicle for introducing experimental new apps, like the PowerPoint alternative/killer Sway or the forthcoming GigJam work-sharing tool, to a paying audience.

Which means that Office 2016 signals a shift in how Microsoft sells you Office: Buy it once, and you get a good product. But cough up your cash regularly, and Office will get better, forever.