Microsoft's Office 365 marks a substantial foray into cloud computing and carries some substantial risks for the company.
For quite some time now, Microsoft
CEO Steve Ballmer and his executives have been touting an "all in" strategy regarding
That strategy predicts a gradual
transition from desktop-based software to online subscription services, with
businesses eventually paying a set amount per month to store their data and
launch applications from Microsoft's servers. In theory, this benefits
businesses by reducing the need for on-premises servers and other IT
infrastructure (and spares them the sometimes onerous process of updating their
own software, since those updates are ported over the cloud). It also benefits
Microsoft by turning customers into monthly subscribers, ensuring a steady
Office 365, released in its final
version near the end of June, represents Microsoft's boldest attempt yet at
enacting this "all in" strategy. A rebranding of the company's BPOS (Business
Productivity Online Suite), Office 365 links Microsoft Office, SharePoint
Online, Exchange Online and Lync Online into a platform that costs between $2
and $27 per month, depending on options. It comes with an Office 365
Marketplace loaded with productivity apps and professional services.
On June 28, Ballmer took to a New
York City stage to roll out the final version of Office 365. "We believe
effective collaboration is a lot more than good group dynamics," he told the
assembled audience of media, analysts and business owners. "It's instant access
to relevant information ... and the right people taking the right action at the
During that launch event, and in its
accompanying press materials, Microsoft seemed intent on angling Office 365 as
primarily a solution for small- to midsize businesses. That would also place
the new service on a collision course with Google Apps, for which SMBs are considered
to a key demographic.
The question is whether Microsoft
can leverage its longstanding presence within the business community to squelch
Google's attempts in the productivity arena. According to analysts, that seems
unlikely, at least in the short term.
"While Office 365 does put Microsoft
in mortal combat with Google," Matthew Cain, an analyst with Gartner, wrote in
a June 28 email to eWEEK,
"it is not
really an existential threat for Google since Microsoft is essentially
validating the model that Google pioneered with Google Apps."
He also suggested that Office 365
could end up drawing added attention to Google Apps as a viable alternative.
Even so, it could be some time before companies choose to submit more
wholeheartedly to the cloud-productivity model. "The first ingredient we need
for companies to wholly embrace cloud-based personal productivity and
collaboration tools is time," Cain wrote.
However, according to another
analyst, Microsoft needs to make its cloud case sooner rather than later.
"Microsoft is struggling to show
value given that Google is preaching -free,'" Rob Enderle, principal analyst of
the Enderle Group, wrote in a June 27 email to eWEEK
. "They need to reeducate their market quickly. But [they] don't
see this as a marketing problem but as a product problem-and they are playing
Google's game as a result."
Microsoft's traditional lines of
business have been performing relatively well, with strong sales of Office 2010
and Windows 7 contributing substantially to the company's bottom line. However,
there are precious few signs in those balance sheets indicating that cloud
initiatives will translate into substantial revenues in the near-term.
Microsoft executives have been reluctant to discuss any hard metrics for
business-cloud adoption. If Office 365 turns out to be a success, it could
start Microsoft down the road to profitability in its cloud-based efforts-and
validate that "all in" strategy.