Buyer’s guide: How to choose Microsoft 365 vs. Office 2021

Microsoft Office is how billions of people around the world go to work and school, whether they do it from home, an office, a classroom, or a combination of any of those. This suite of productivity tools is used by people working in 106 languages in nearly every country in the world, and it’s available in versions for personal, small business, enterprise, and educational use.

But there is more than one way to buy Office — or, rather, to buy the license to use it. There’s the “perpetual” version of Office that’s available as a one-time purchase; the most current version is Office 2021. Then there’s the subscription version that lives in the cloud and for which you pay a monthly or annual fee. When this version was introduced in 2011, Microsoft called it Office 365, later renaming it Microsoft 365 for personal and small business subscriptions. At the enterprise level, both Office 365 and Microsoft 365 plans are available. In this story, we’ll use “Microsoft 365” as shorthand for all “365” subscriptions unless we’re referring to a specific plan.

Why choose to buy it one way and not the other? The answer can be confusing, especially since each suite of tools includes most of the same applications, give or take.

Microsoft has made its preference clear: The company believes that “the cloud will power the work of the future” and would love it if everyone purchased Microsoft 365. There are lots of incentives for doing just that. But you have options.

Office 2021 vs. Microsoft 365: What to consider

• Microsoft Office plans and pricing
• How you pay for Office
• How each version of Office is serviced
• How Office hooks up with cloud services

Here’s help deciding which version of Office is right for you or your company.

Microsoft Office: The options

For personal use

• Office Home & Student 2021: $150, one-time purchase for use on one computer; includes Word, Excel, PowerPoint, and OneNote.
• Microsoft 365 Personal: $70 a year or $7 a month (1 user, multiple devices); includes Word, Excel, PowerPoint, OneNote, Outlook, OneDrive, and Teams.
• Microsoft 365 Family: $100 a year or $10 a month (6 users, multiple devices); includes Word, Excel, PowerPoint, Outlook, OneDrive, Teams, and Family Safety.

For small businesses

• Office Home & Business 2021: $250, one-time purchase for use on one computer; includes Word, Excel, PowerPoint, and Outlook.
• Office Professional 2021: $440, one-time purchase for use on one computer; includes Word, Excel, PowerPoint, Outlook, Publisher, and Access; works with Teams.
• Microsoft 365 Apps for business: $8.25/user/month (up to 300 users); includes Word, Excel, PowerPoint, Outlook, OneDrive, Publisher, and Access.
• Microsoft 365 Business Basic, Standard, and Premium: plans range from $6/user/month to $22/user/month (up to 300 users); tools included depend on the level of your subscription. Desktop versions of Word, Excel, and other Office apps require a Standard plan or higher; the Basic plan offers only web and mobile versions. All plans include Exchange email hosting, OneDrive, and SharePoint. The Premium plan adds advanced security and management features.

For enterprises

• Office LTSC 2021: available only through volume licensing; this Office title stands for Long Term Servicing Channel — it’s the commercial version of Office 2021. According to Microsoft, it’s designed for regulated devices that can’t accept updates for security reasons and for systems that don’t connect to the internet. (Note, however, that it’s the only non-subscription version of Office available for large organizations.) Includes Word, Excel, PowerPoint, Outlook, OneNote, Access, and Publisher.
• Microsoft 365 Apps for enterprise: $12/user/month (up to 5 devices per user); annual commitment required; includes Word, Excel, PowerPoint, Outlook, Teams, OneDrive, OneNote, Access, and Publisher.
• Office 365 E1, E3, and E5: plans range from $10/user/month to $38/user/month; annual commitment required; tools included depend on the level of your subscription. Desktop versions of Word, Excel, and other Office apps require an E3 plan or higher; the E1 plan offers only web and mobile versions. All plans include Exchange Online, OneDrive, SharePoint Online, and additional enterprise services. The E5 plan adds advanced security, compliance, and management features.
• Microsoft 365 E3 and E5: plans range from $36/user/month to $57/user/month; annual commitment required; these plans offer most of the same features as the Office 365 E3 and E5 plans, and also include Windows and additional Microsoft services such as Visio.
• Other plans: Microsoft offers additional Office 365 and Microsoft 365 plans for education, government, and nonprofit organizations, and for frontline workers.

How you pay for Office

One big difference between the “2021” and “365” options is how you pay for them. If you are buying a “perpetual license” (such as with Office Home & Business 2021 or Office LTSC 2021), you pay a larger sum than with the subscription’s offerings under the Microsoft 365 or Office 365 brand, but you do so only once. When you subscribe to any of the Microsoft 365 or Office 365 plans, you pay annually or monthly.

Office 2021: a perpetual license

Whether you buy a single copy of Office 2021 in a retail outlet or download hundreds of seats via volume licensing, Microsoft calls this is a “one-time purchase” because you pay only once, not every month. (Labels like “perpetual,” which have been widely used by Computerworld, technically note the type of license rather than payment methodology, but in this case, the kind of license is tied to whether it was bought outright or simply “rented.”)

Microsoft defines the term as when “…you pay a single, up-front cost to get Office applications for one computer.” Up-front is the key adjective there. You have to ante up the entire purchase price before you get the software.

That purchase of a license to legally run the software gives you the right to use that version of Office 2021 in perpetuity. In other words, the license has no expiration date, and users may run the suite for as long as they want. Pay for Office 2021 this year and use it for the next seven years? Fine. Use it to operate your space portal in the year 2050? Nothing to stop you. (Except hardware compatibility. Though you could probably find an old, refurbished computer and drag that into space.)

But if you want new features that come out with the next update, you will have to pay full price again, whatever that is, when the next version comes out — if one comes out. There are no upgrade options on the perpetual license packages.

Microsoft 365: Office as a service

Microsoft 365, the purchase method Microsoft would prefer you choose, is a subscription service, where you pay the software giant monthly or annually. There is a discount, sometimes a tempting one, for going with the annual payment plan over the monthly one. (All enterprise plans, from Enterprise E1 to E5, require an annual commitment.) And the company is always sweetening this pot by offering more apps than you get with the perpetual license products and with a continuous supply of new features.

Like any subscription, Microsoft 365 provides a service — in this case, the right to run the suite’s applications and access the associated services — only as long as payments continue. Stop paying, and rights to run the apps expire. This happens in a progressive way, giving you time to download your data or update your payment plan, whichever you choose.

For 30 days after non-payment, your plan will be “Expired.” You will still have access to all your apps and files. If you don’t activate it again while it’s in the Expired stage, it moves to “Disabled,” where it will stay for 90 days. You won’t be able to access your apps or data until you pay up. If you still don’t pay for your plan, it will be “Deleted.” At that point, it’s gone.

A Microsoft 365 license, then, is contingent on sustained payments. Halt the latter, and the license is revoked. Restart the payments — but don’t wait too long — to restore the license.

How each version of Office is serviced

Although payments define one difference between Office 2021 and Microsoft 365, Microsoft’s development and release pace is ultimately more important to users — and the IT professionals who support them.

Think of Office 2021 as traditional software — a bundle of tools that typically don’t change much until the next major version. That holds for servicing, too. Microsoft does release monthly security and quality updates for the perpetual license versions of Office. (You can check from within any Office app if there are updates available. From, say, a Word document, go to File > Account and look for Product Information. Then choose Update Options and Update Now.)

But Office 2021 doesn’t get the continually upgraded features and functionality that Microsoft 365 does. What you get when you buy the suite, feature-wise, is it. If you want the updates, at some point in the future, you will have to buy whatever version Microsoft is selling as a perpetual license then.

(The company says of the release of Office LTSC 2021, “While this will not be our last perpetual release, we continue to make investments that make it even easier for customers to adopt Microsoft 365.” And in an online explainer about all Office products, the company says, “We are happy to confirm our commitment to another release of the perpetual version of Office in the future, beyond this release.”)

Microsoft regularly releases feature and security updates for Microsoft 365 apps, though. And it releases them as they happen. As new features and functionality accrete, and the applications in Microsoft 365 evolve, Microsoft will decide it’s time for a new version of Office. It will then package some of those features into an upgraded suite for customers who continue to make one-time, up-front purchases. How long they keep doing this likely depends on how long there is a demand for these “locked in time” versions.

One other important note: Office 2021 and Office LTSC 2021 will be supported with security updates only through Oct. 13, 2026. That’s just five years of support, down from seven years in Office 2019 and 10 years in prior releases. In contrast, with Microsoft 365 subscriptions, support never runs out — as long as you keep paying, of course.

How Office hooks up with cloud services

One reason to choose Office 2021 over Microsoft 365 is internet access. If you don’t have reliable access to the cloud, can’t be connected to the internet for security reasons, or — for whatever reason, maybe you live on a remote mountaintop — your computer is often offline, this is the type of software you need.

In fact, internet access is one of the main reasons Microsoft can’t force us all to subscribe to Microsoft 365. Microsoft 365 runs in apps that are downloaded to your computer, phone, or tablet, but those apps require near-constant internet access, especially if you use OneDrive and store all your files in the cloud.

In standard use, Microsoft 365 stops working if it can’t connect to the internet for 30 days. For some use cases, this is a deal breaker. But the company is making efforts to overcome this objection to the Microsoft 365 products. Last year, Microsoft launched features for enterprise users that allow Microsoft 365 keep working without issue even if it is offline for extended periods of time. An IT administrator has to set it up, but after that, a user can keep working, offline, for up to 180 days.

Office 2021, on the other hand, does not rely as heavily on an internet connection to operate, save files, and self-update. You can connect it when you have access and work offline when you don’t. This, as much as cost and a desire to stick to old-school software distribution models is, perhaps, the most compelling reason to insist on one of the perpetual license products.

Whichever license you ultimately choose, you will get many of the same tools. And the reasons for making one choice over another have less to do with price and features than with how you or your users work, support and security needs, reliability of internet access, online storage and collaboration needs, and how excited (or annoyed) you or your users are likely to be by new features that turn up, like a gift, in the software.

This article was originally published in July 2017 and most recently updated in June 2022.