How Far Will Microsoft Go with Cloud?

As the Enterprise 2.0 conference unfolds in Boston this week, the whole software industry will be observing Microsoft's shift to online services, as it responds to the cloud computing model championed by competitors like Salesforce.com, Google and start-up social software vendors.

When Microsoft announced back in November that it would offer an online version of SharePoint, its main collaboration package, and Exchange, the company's popular e-mail system for businesses, it signaled a long-awaited change in strategy from the world's most powerful software company. This represented a concession from Microsoft that businesses want software that is fully online.

To date, the majority of Microsoft's software has come paired with servers and hardware that IT departments run and manage in-house. Now, with online services, Microsoft can manage the software in its own data centers while employees at customer companies around the world access applications through a web browser.

According to Microsoft executives, companies can realize huge cost savings by not hiring staff to manage Exchange servers or reallocate current IT staff to other areas-a refrain software as a service (SaaS) vendors have been pushing for years now.

"IT is dominated by the people cost," says Bob Muglia, president of the Microsoft Server & Tools division. "It's the single largest expense in IT. By leveraging the scale online services can deliver, you can leverage costs and be leaner."

Hosted E-Mail Can Equal Quick Win

Though socially-oriented technologies on display at Enterprise 2.0 have become increasingly important for collaboration efforts, e-mail remains central to most companies communications efforts. Here, many companies can save a pile of cash by moving to the cloud. For large, enterprise businesses, an Exchange server starts at nearly $4,000, and standard licenses cost as much as $67 per user. In stark contrast, the new online version of Exchange can be purchased for around $10 per user per month.

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