Having owned a small consulting business for nearly a decade before changing jobs several months ago, I have long been a customer of Microsoft’s Small Business offering. Leaving the corporate fold when I started out presented a challenge in terms of maintaining the technical services I’d been accustomed to, and Microsoft’s Small Business Server fit the role fairly admirably.

The major drawback to a product like Small Business Server was that it required hardware and software, which in turn required a fair bit of maintenance and configuration, especially on the Exchange and SharePoint fronts. This changed when Microsoft released Office 365.

Office 365 was Microsoft’s major push toward turning its Office and Exchange products into a monthly service that could be provisioned and scaled with little more than a credit card or purchase order, rather than deploying hardware and software. With the release of Office 2013, Microsoft has doubled-down on “Office as a service,” offering revised plans and pricing for consumers and businesses.

New services, same arbitrary distinctions

Software as a service is no longer the outlier it once was, and large and small businesses are increasingly looking to SaaS solutions to software problems. Tiered functionality is an obvious feature, allowing customers to purchase the right level of functionality for their budget and requirements.

Microsoft, however, takes the tiered approach to another level, offering six main plans divided among small, midsize, and “enterprise” class businesses, combined with another half dozen plans and options ranging from kiosk-related plans to educational and single-feature options.

Essentially Microsoft’s subscriptions vary along several dimensions: number of users, inclusion of downloadable Office software, and ancillary features. Any of these dimensions could drive the plan you select. For example, if you require email archiving, you’re pushed into the Enterprise E3 plan and your costs increase by 33% (from $15 to $20) per user.

There is also no obvious way to migrate between the different “classes” of plans; should your small business grow into a “Midsize Business,” migration appears to be more difficult than a simple click or two on the licensing screen. The converse is also true. I selected an Enterprise plan a few years ago since it was the only way to acquire a full Office license at the time, and I’m now stuck in the “Enterprise” tier with no way to migrate beyond creating a new account, manually migrating my data, and creating a new account in an alternate “tier.”

Contrast this approach with SaaS leaders like Salesforce.com, where subscribers can readily migrate up and down pricing tiers without being forced into arbitrary distinctions like “Midsize Business.” Presumably these distinctions provide a means for Microsoft to segregate customers into existing sales and marketing channels, which presumably made a great deal of sense in the days of package software, but now seem anachronistic.

Take care in selecting a pricing tier, then leverage the service

At the end of the day, the quality and capabilities of Office 365 are compelling for businesses of all sizes. Except for very large companies that can generate massive economies of scale by keeping these services in-house, managing email, Office licensing, and collaboration and communication tools internally makes little sense, especially with the commodity pricing Microsoft has on offer with Office 365.

Take some care in determining which plan makes the most sense for your company, and ignore Microsoft’s attempts to pigeonhole your organization into one of their rather arbitrary “tiers.”