Why is Microsoft breaking up Teams and Office?

Microsoft's products remain among the most used in the workplace, especially its video-chatting service Teams and its flagship suite of apps, Office. However, the pair are about to undergo a major change: While Teams and Office have previously been offered as a bundle, Microsoft has announced that it will begin selling the two products as separate entities.  

This change already occurred in Europe at the end of 2023, but this announcement confirms that Microsoft will unbundle the two products globally. This separation will be implemented via a "new lineup of commercial Microsoft 365 and Office 365 suites that do not include Teams in regions outside [Europe] and Switzerland," Microsoft said in a press release. The company also provided a list of options for customers in the U.S. — and everywhere else — to "continue to use, renew, upgrade, and add seats to their current plans as usual."

The unbundling comes as a result of warnings from regulators about possible antitrust violations. They cautioned the company that "packaging the products together gives Microsoft an unfair advantage," according to Reuters, which first reported the news. The company is now implementing its unbundling change globally in an attempt to avoid antitrust fines from the European Union and other regulators. 

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What did the commentators say?

Microsoft has long been in the crosshairs of antitrust regulators, as the fact that it bundled Office and Teams together has "upset some competitors, with some asserting that the tech giant was leveraging its position in an unjust manner to gain a competitive edge," Manish Singh said for TechCrunch. 

Beyond regulators themselves, competitors have also expressed anger toward Microsoft. Salesforce, which owns the instant messaging app Slack, has "termed Microsoft's actions 'illegal' in the past, alleging that the Windows-maker forced installation of Teams to customers through its market-dominant productivity suite and hid the true cost of the chat and video service," said Singh. 

There is no doubt that Microsoft's decision is the "latest effort by the software giant to head off investigations by global antitrust enforcers as regulators examine the power of Big Tech," The New York Times' DealBook newsletter said. This isn't a unique proposition for Microsoft, as the separation is "reminiscent of Microsoft's unbundling of Windows in the 2000s," which came after a "bruising antitrust battle with the Justice Department over the tech company’s efforts to shut rivals out of its platform."

Having learned its lesson from that period, Microsoft's announcement "appears aimed at allaying some of those concerns," Brian Fung said for CNN. But the fight may not be over, as the European Union has continually "expressed concerns about Microsoft 'abusing' the market dominance of its Office productivity software to restrict competition for 'communication and collaboration products,'" Siladitya Ray said for Forbes. 

What next? 

The split of Microsoft's products could be a turning point for competitors. Besides Salesforce, video communications company Zoom has "struggled of late to compete with Microsoft’s suite of communications products," CNBC said. Many workplace customers "believe Zoom is a superior platform vs. Teams," but the "bundling of Teams to Office has always been enticing for customers to consider Teams," analysts at Mizuho Securities said to CNBC. 

The fact that this bundle will no longer exist "should help alleviate some enterprise churn headwinds" and calm the concerns of antitrust regulators, the Mizuho analysts said. This appears to be what Microsoft is banking on, as the unbundling will allow for "proactive changes that we hope will start to address these concerns in a meaningful way" and would make "interoperability easier between rival communication and collaboration solutions," Nanna-Louise Linde, the vice president of Microsoft's European Government Affairs, said in a statement after the plan was announced in Europe last year. 

And while Microsoft's decision comes at the behest of antitrust pushes, the company may not be completely off the hook. Microsoft has already racked up $2.4 billion in EU regulatory fines over the past decade and "risks a fine of as much as 10% of its global annual turnover if found guilty of antitrust breaches," Reuters said. The unbundling is a big step — it "may not completely ward off further regulatory scrutiny, but showing regulators Microsoft is willing to be proactive could still soften the stance by regulators," Gil Luria, a senior software analyst at D.A. Davidson, said to Reuters.