As Microsoft moves forward with its acquisition of enterprise social networking company Yammer, industry analysts are starting to identify opportunities for the upstart Yammer to help the software giant make a faster transition to cloud computing.
deal to acquire enterprise social media company Yammer still has
some people scratching their heads about the synergy the two companies will
generate, but Yammer could actually teach Microsoft a thing or two, an industry
Microsoft built its fortune by selling
software licenses to computer makers, businesses and consumers. Yammer built
its business into something worth paying $1.2 billion for by whats called the
Individual employees downloaded Yammer for
free and eventually adoption went viral within companies and at many others.
Once enough people within a company started using Yammer, their employer went
ahead and subscribed to premium services to manage Yammer across the
enterprisehence, the term freemium. Yammer
rival Salesforce.com's Chatter
also follows the freemium model.
Microsoft could adopt the Yammer freemium
model to sell flagship products, such as the Office
suite of productivity applications
, said Hyoun Park, principal analyst at
Nucleus Research. Yammer will operate within Microsofts Office division.
Park described a scenario within an
enterprise where there is a large installed base of on-premise Microsoft
software, perhaps Office 2007. Meanwhile, other employees subscribe to Office
365, the cloud-delivered, subscription-based version of Office. With Office
365, subscribers are always running the latest version of the suite, including
Word, Excel, PowerPoint and the rest.
If Office 365 users receive a free demo of an
upcoming upgrade and see the potential advantages of the new Office 365
version, adoption will increase. Over time, this will force IT managers to deal
with the glitches associated with compatibility issues among multiple versions
of Office 365 and the on-premise version of Office. The company eventually has
to do what Park calls a bully upgrade where eventually it adopts the latest
version of Office 365 across the enterprise, including for those still using
You have a certain critical mass of end
users that are already using the newest version of Office through the cloud and
then soon ¦ [the company has] to upgrade to the new version and you have to
make that decision more quickly than you had to before, he said.
In the case of both Yammer and Office, the
strategy helps make the product indispensable.
The Yammer business model is about being too
useful to get rid of and Office productivity applications often play a similar
role of being too valuable to stop using, Park said.
Of course, another strategy might be for the
enterprise to adopt Office 365 across the board to make sure everyone is on the
latest version of the suite. Nucleus Research provided a case study about an
Office 365 project at Carolina Realty Group, a real estate brokerage based in
Hilton Head Island, S.C.
Carolina Realty Group chose Office 365 (over
Google Apps) to serve its 27 brokers, and according to a case study of this
software implementation, the company realized a return on investment (ROI) of
1,213 percent over 2.4 years. It saved on operating expenses and future
hardware costs by shutting off its Microsoft Exchange servers and avoided
software license subscription fees by switching to the subscription model.
It might even have saved enough money to
subscribe to Yammer.
The freemium model is also the basis for
Skype, the voice over IP (VOIP) voice and videoconferencing business Microsoft
acquired for $8.5
billion last year
, noted analyst Park. Skypes growth was viral, too, as
individuals subscribed one at a time and were able to call other Skype
subscribers for free.
This is fundamentally a new way for
Microsoft to potentially get customers, he said. Microsoft didnt just spend
$10 billion [combined] on these two companies just for the technologies
although the technologies are good, too.