Microsoft 365 vs Office 365: What’s the Difference?

Microsoft 365 and Office 365 are subscription plans that give you access to Microsoft’s productivity apps like Word, Excel, and PowerPoint, plus cloud services. The key difference is that Office 365 is the older name for business and enterprise plans, while Microsoft 365 includes Office apps plus Windows 10/11 and additional security and device management tools. For home users, Microsoft 365 (formerly Office 365 Home/Personal) is the current name for the subscription that includes Office apps and 1TB of OneDrive storage.

Background: The Evolution from Office to Microsoft 365

Microsoft Office started as a boxed software suite in the 1990s, sold as a one-time purchase. In 2011, Microsoft introduced Office 365 as a subscription service for businesses, offering the same apps plus cloud features like Exchange Online and SharePoint Online. For consumers, Office 365 Home and Personal launched in 2013, providing Word, Excel, PowerPoint, and other apps on a monthly or yearly subscription.

In April 2020, Microsoft rebranded Office 365 as Microsoft 365 to reflect a broader offering that goes beyond Office apps. The new name emphasizes the integration of Windows, Office, and cloud services. Today, Microsoft 365 includes the Office apps, but also adds features like Microsoft Teams, advanced security, and AI-powered tools like Copilot (in some plans).

What’s Included in Microsoft 365 Plans?

Microsoft 365 plans vary by audience, but most include the core Office applications: Word, Excel, PowerPoint, Outlook, OneNote, and Publisher (on PC). Access is included in business plans but not in home plans. All plans come with cloud storage via OneDrive, and most include Microsoft Teams for communication.

Here’s a breakdown of typical inclusions:

Office apps: Word, Excel, PowerPoint, Outlook, OneNote (and Publisher/Access on PC for some plans)
Cloud storage: 1TB OneDrive per user (home plans) or 1TB per user (business plans, varies)
Communication: Microsoft Teams (for business and some home plans)
Security: Advanced security features like multi-factor authentication and identity management (business plans)
Windows: Windows 10/11 license (only in Microsoft 365 Family/Personal, not in Office 365 business plans)
AI features: Copilot in some plans (extra cost)

How Microsoft 365 Works: Subscription vs. One-Time Purchase

Microsoft 365 is a subscription service, meaning you pay a recurring fee (monthly or annually) to use the software. In return, you always have the latest versions of the apps, and you can install them on multiple devices (usually 5-6 for home plans, 5 per user for business). The apps are installed locally on your PC or Mac, but they also sync with the cloud via OneDrive and SharePoint.

In contrast, Office 2021 and Office 2024 are one-time purchases that give you the apps forever, but you don’t get future feature updates or cloud storage. For most users, the subscription is better because it includes cloud storage and regular updates, but if you prefer to pay once and keep the same version, the standalone version is cheaper in the long run.

How to Choose: Which Plan Is Right for You?

Choosing between Microsoft 365 and Office 365 depends on your needs:

For home use: Microsoft 365 Family (up to 6 people) or Personal (1 person) is the current choice. It includes Office apps, 1TB OneDrive per person, and Teams for personal use.
For small business: Microsoft 365 Business Basic (web and mobile apps only) or Business Standard (desktop apps) are common. If you need more security, Business Premium adds advanced protection.
For enterprise: Microsoft 365 E3 or E5 offer the full suite with compliance and analytics tools. These are typically for larger organizations.
If you just need Office apps: You can still buy Office 2021 or 2024 as a one-time purchase, but you won’t get cloud storage or updates.

A common misconception is that Office 365 is cheaper than Microsoft 365. In reality, Microsoft 365 home plans cost the same as the old Office 365 home plans, but they include more features like Teams and additional security. For business, Office 365 plans were renamed to Microsoft 365 with no price change for the same features.

Common Problems and Misconceptions

One of the most frequent issues users face is confusion over what’s included. Many people think Microsoft 365 includes Windows, but that’s only true for home plans (Family/Personal) that include a Windows license. Business plans do not include Windows; they focus on Office and cloud services.

Another problem is dealing with expired subscriptions. If you stop paying, the apps go into read-only mode, and you lose access to OneDrive storage over time. However, you can still download your files before the grace period ends.

A common misconception is that you need Microsoft 365 to use Word or Excel. You can use the free web versions via Office.com, but they lack many features and don’t include desktop apps. Also, the mobile apps are free to download and use for basic editing, but advanced features require a subscription.

Costs and Licensing

Microsoft 365 pricing varies by plan and region. As of 2024, typical prices are:

Microsoft 365 Personal: ~$69.99/year or $6.99/month
Microsoft 365 Family: ~$99.99/year or $9.99/month (up to 6 users)
Microsoft 365 Business Basic: ~$6/user/month
Microsoft 365 Business Standard: ~$12.50/user/month
Microsoft 365 E3: ~$36/user/month

All prices are subject to change and vary by country. Educational institutions often get Microsoft 365 Education for free or at a discount. Nonprofits can also get discounted plans.

Licensing is per user, not per device. This means each person who uses the software needs their own license, but they can install the apps on multiple devices (PC, Mac, tablet, phone) under that one license.

Security and Privacy

Microsoft 365 includes several security features, especially in business plans. These include multi-factor authentication (MFA), data loss prevention, and advanced threat protection. For home plans, security is more basic, but you still get secure cloud storage and automatic updates that patch vulnerabilities.

Privacy is a common concern. Microsoft states that it does not use your data for advertising, and you can control what telemetry data is sent. However, some users are uncomfortable with cloud-based processing. If privacy is a top priority, you can use the desktop apps without signing into the cloud, but you’ll lose features like real-time collaboration and OneDrive sync.

Alternatives to Microsoft 365

If Microsoft 365 doesn’t fit your needs, several alternatives exist:

Google Workspace: Includes Gmail, Docs, Sheets, Slides, and Drive. It’s cloud-first and often cheaper, but lacks the advanced features of Microsoft Office.
LibreOffice: A free, open-source office suite that supports most Office file formats. It’s a good option if you don’t need cloud features.
Apple iWork: Free for Apple users, includes Pages, Numbers, and Keynote. Works well within the Apple ecosystem.
Zoho Workplace: A budget-friendly suite with office apps, email, and collaboration tools.

Each alternative has trade-offs in compatibility, features, and price. For most businesses and heavy Office users, Microsoft 365 remains the standard due to its robust feature set and integration.

Frequently Asked Questions

Is Office 365 the same as Microsoft 365?

Yes, Microsoft 365 is the current name for what used to be called Office 365. The rebranding happened in 2020, and all Office 365 plans were renamed to Microsoft 365. The features and pricing remained the same, but Microsoft 365 also includes some new additions like Microsoft Teams for home users.

Do I need Microsoft 365 to use Word and Excel?

No, you can use the free web versions of Word, Excel, and PowerPoint through Office.com, and the mobile apps are free for basic editing. However, the full-featured desktop apps require a Microsoft 365 subscription or a one-time purchase of Office 2021/2024.

Can I buy Microsoft 365 as a one-time purchase?

No, Microsoft 365 is subscription-only. If you want a one-time purchase, you can buy Office 2021 or Office 2024, which gives you the apps forever but no cloud storage or future feature updates.

What happens if I cancel my Microsoft 365 subscription?

If you cancel, the apps go into read-only mode, meaning you can view and print documents but not edit them. You also lose access to the 1TB OneDrive storage, though you have a grace period (usually 90 days) to download your files.

Does Microsoft 365 include Windows?

Only Microsoft 365 Family and Personal plans include a Windows license (Windows 10 or 11). Business and enterprise plans do not include Windows; they focus on Office apps and cloud services.

Is Microsoft 365 worth the cost?

For most users, yes, because it includes the latest Office apps, 1TB cloud storage, and regular updates. If you only need basic word processing, a free alternative like Google Docs or LibreOffice may be sufficient.

General steps for current mainstream versions; menus can differ by device and version. See the disclaimer or report an error.

More in this bed

The whole Tech How-To bed →