Will Microsoft Online Services Cannibalize On-Premises Exchange, SharePoint?

Microsoft executive Chris Capossela denies that Microsoft Online Services such as Exchange Online and SharePoint Online will eat into the market share of Microsoft's traditional on-premises messaging and collaboration software suites. If this is true, it's good news for Microsoft as it moves deeper into cloud computing and SAAS to take on Google in Web services.

Microsoft on Nov. 17 formally launched Exchange Online and SharePoint Online, Web-based versions of its productivity and collaboration software applications, providing two more logs with which to stoke the fire in its fight with Google.
Exchange Online and SharePoint Online represent an attempt to take share from Google Apps in the increasingly turbulent market for SAAS (software as a service), or cloud computing. Google Apps, including Gmail and Docs word processing, presentation and spreadsheet programs, was created as an alternative to Microsoft's Exchange and SharePoint.
Is it not logical to conclude that Exchange Online and SharePoint Online might similarly take share from Microsoft's classic packages, which users download locally to PCs and servers? Will Microsoft's SAAS solutions cannibalize the sales of its on-premises applications?
Not at all, said Chris Capossela, senior vice president for Microsoft's Information Worker division. Capossela said two-thirds of existing Exchange Online and SharePoint Online customers, as well as those currently in the pipeline, are coming from on-premises suites such as IBM Lotus Notes and Novell GroupWise. He added:

"We see this as an expansion of customers we are able to serve with Exchange and SharePoint, not a migration of existing customers. We can now reach people more easily and they don't need an IT person to run their messaging."

No doubt Google's enterprise team used the same argument to promote Google Apps over Exchange and SharePoint. Ironically, Capossela didn't claim Microsoft was taking share from Google. He said he expects that to change because Microsoft is offering more flexible pricing than Google's one-size-fits-all pricing.