Office 2016 vs Office 365: What’s the difference?

If you're looking to purchase Microsoft Office for your business, you've got plenty of options. But understanding difference between the options - most notably between Office 2016 and Office 365 - can be confusing.

The short version: Office 2016 is a version of the Office productivity suite (Word, Excel, PowerPoint, etc), typically accessed via the desktop. Office 365 is a cloud-based subscription to a suite of programs including Office 2016. This means you have a few options for purchasing Office 2016: a stand-alone product or as part of an Office 365 subscription.

(Update 10/1/2018: Office 2019 is now available for purchase. The below post is still true, but there are more differences between Office 2019 and Office 365 ProPlus (the version of Office included in Office 265) than in previous releases of Office. You can compare features here.)
Here's what you get what you get with each option (please note: this focuses specifically on Office 365 business and enterprise plans):

Stand Alone Office 2016

There are two stand-alone versions available for businesses:

Office Home & Business 2016

Includes Word, Excel, PowerPoint, OneNote and Outlook) for $229.99 for 1 PC (or Mac – Mac users must purchase Office Home & Business 2016 for Mac)

Office Professional 2016

Includes everything in Home & Business 2016 plus Publisher and Access for $399.99 for 1 PC (not compatible with Mac)

The stand-alone versions include the ability to save your files to the cloud, which makes collaboration easier – especially among teams not working in the same physical location.

Office 2016 as part of Office 365

If you purchase Office 2016 as part of an Office 365 plan, you have a lot more options for plans and a lot more features.

ALL Office 365 plans include:

• Online versions of Office (Word, PowerPoint, Excel)
• 1 TB per user of file storage and sharing (OneDrive)
• Sway presentation creator (learn the differences between Sway and PowerPoint in this blog post)
• 99% uptime guaranteed
• World-class data security
• Active Directory integration to make user permissions

As you go up in Office 365 plans, features you can get in addition to the above include:

• Full desktop versions of Office (Word, PowerPoint, Excel plus OneNote and Publisher) on up to 5 computers per user
• Office on tablet or mobile (compatible with most tablets and phones regardless of OS)
• Outlook with 50 GB of inbox space per user
• SharePoint (customizable intranet)
• Skype for Business instant messenger (can also be used as your phone system)
• Yammer (corporate social network)
• Compliance Protection (Encrypted Email, Data Loss Prevention, etc)

Which is right for me? Factors to consider:

There are few things to consider when deciding which version of Office 2016 or Office 365 is right for you:

Desired programs and features

Take a good look at what programs and features are important to you. If you just need the basic Office programs like Word, PowerPoint and Excel, either a stand-alone version or a lower level Office 365 plan is probably enough for you. If you’re looking for something more robust, or with access to programs like SharePoint, you’ll need Office 365.

• Office 2016: Stand-alone Office 2016 is the same as previous versions of Office in that you won’t get access to new features until you install a new version of Office. 
• Office 365: Since Office 365 is a subscription service, you’ll get access to new features as they become available. You’re also going to have access to a lot more features.

Accessibility

If you need to access your information from multiple devices, Office 365 is the way to go. While files in Office 2016 can be saved to the cloud, Office 365 gives you a lot more options for access plus the ability to install Office on multiple machines. It also gives you the ability to access online versions of Office programs from ANY device with an internet connection.

Movement between plans

Is it possible you’ll need to upgrade your plan?

• Office 2016: Since Office 2016 is a standalone software, if you need to add features or upgrade, you’ll need to purchase and install new licenses for all users. Keep in mind that Office 2019 will be released sometime in 2018. 
• Office 365: Office 365 users can switch between plans in the admin center at any time.

Price

What can you afford to pay per user? Would you rather pay a large sum up front or a small monthly fee?

• Office 2016: The stand-alone version is a one-time cost per user, so it will be a large expense up front, but you won’t have to pay a monthly fee after.
• Office 365: Office 365 is a subscription plan, meaning you won’t pay anything up front, but you will pay a set monthly fee per user per month. If don’t have the capital to pay a large chunk of change up front, this may be the better option, even if you don’t need all the features.