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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.
What Analysts Are Saying
eWEEK asked analysts who follow the space closely whether Microsoft would eat up some of its own Exchange and SharePoint CAL and SA share.
Josh Greenbaum of Enterprise Applications Consulting said Capossela may have not mentioned Google because he knows Google is already taking share from Microsoft’s classic on-premises business. He applauded Microsoft’s Online Services move:
“In a certain sense, this is a smart strategy for Microsoft to recapture some potential lost revenue and keep it in-house. It has the potential to be less remunerative in the short run but it’s better than losing seats to the competition.“
Sara Radicati, of the Radicati Group, had a different take. She noted that while Google Apps’ pricing is attractive, there is a segment of the customer base looking for the same Exchange and SharePoint functionality they have today but at a lower cost of operation.
At $2 to $15 per user, per month for Exchange and/or SharePoint, Radicati said she believes Microsoft’s Online Services are attractive. She added:
“I don’t think Microsoft is so much “cannibalizing” sales of its own on-premises software, rather I think the hosted option is essential for them to hold on to SMB [small and midsize business] customers that would be migrating to a hosted (or non-hosted) lower-cost option anyway. Basically these are customers they would have lost anyway from their on-premises software offerings, so this way they have a way of retaining them.“
Forrester Research’s Chris Voce agreed, noting that even if a customer stops paying software assurance on Microsoft’s on-premises licenses and moves to Microsoft’s Online Services, the vendor would still be in a nice “ongoing billable relationship” that kept customers at Microsoft.
Finally, Capossela clung to what has been Microsoft’s mantra the last few years: software plus services. More choice, he said, is the winning proposition.
“Everyone knows the future lies in leveraging best of cloud and on-premises software. The vast majority of customers will live in a hybrid world, where they will mix and match, software plus services. What we have is very different from Google or anybody else in the market.“
Take that, Google.