Microsoft straightens out cloud strategy -- finally

Microsoft expects to make even more progress next year with Office 365

Things will get rowdier for vendors of cloud collaboration, communication and office productivity applications now that Microsoft plans to unleash a take-no-prisoners assault on the market with Office 365.

No longer tentative about offering a full suite that combines online versions of the 2010 editions of Exchange, Office, Sharepoint and Lync, Microsoft is bringing out the big guns against rivals like Google, IBM/Lotus and others.

For some industry experts, Office 365 is proof that Microsoft has overcome its reluctance about the cloud model and its concern about cannibalizing its valuable on-premise software business.

"Microsoft is linking its crown jewels, the most valuable parts of the company's product line, and evolving them with the cloud, another sign of how serious they are about this," said Jeffrey Mann, research vice president at Gartner.

As 2009 ended, Microsoft headed into yet another year with confusingly branded and configured set of cloud-hosted office productivity, collaboration and communication suites.

Lingering as it had for several years was the question of when Microsoft would have a cloud suite as uniform, solid and successful as its on-premise productivity, collaboration and communication portfolio, anchored by Office, Exchange and Sharepoint.

Ringing in the ears of likely mortified Microsoft officials were snide putdowns by rivals like Google and sharp criticism of industry analysts charging the company with being out of touch with the cloud delivery model.

Twelve months later, things have changed.

In 2010, Microsoft delivered regular upgrades and new features for its Business Productivity Online Suite (BPOS), which includes Exchange Online, SharePoint Online, Office Communications Online and Office Live Meeting.

In the summer, in addition to Office 2010, Microsoft also introduced Office Web Apps, a hosted office suite designed to compete against the likes of Google Docs through Web-based versions of Word, Excel, PowerPoint and OneNote.

But the big whammy came in October, when Microsoft outlined the next version of BPOS, called Office 365: a full-fledged option to Google Apps and other similar cloud-based suites.

Office 365 combines the collaboration and communication elements of BPOS with Office Web Apps and, alternatively, even with Office 2010. It is the broad cloud suite that experts have predicted for years Microsoft could build -- and rock the market if priced and configured correctly.

Although Office 365 is in limited beta testing and won't be widely available until some point in 2011, its announcement changed the landscape. CIOs and IT chiefs evaluating cloud collaboration, productivity and communication suites now will have a unified alternative from Microsoft, a leading vendor of this type of software for on-premise deployments for over a decade, along with IBM/Lotus and Novell.

"Microsoft has made some very good progress," said Michael Osterman, president of Osterman Research. "Office 365 is a pretty complete suite in terms of e-mail, calendar, task management, document collaboration, real time communications and so on."

Office 365 will consolidate under its brand various other communication and collaboration cloud offerings, including Live@edu, designed for educational institutions, and Office Live Small Business.

"I'm positive about what they're doing. They're executing against the roadmap they laid out and making the progress they said they would," said Rob Koplowitz, a Forrester Research vice president.

New Idea Engineering, which implements enterprise search systems and counts among its partners the Microsoft Fast Search division, implemented BPOS in July, after enduring heavy spam, lost messages and slow performance from its previous e-mail provider.

At US$10 per user per month, including reliable e-mail and responsive phone support, BPOS has worked very well for the Santa Clara, California company, said its founder Miles Kehoe.

He's looking forward to Office 365, whose Office, Exchange and SharePoint versions are based on the 2010 editions of the on-premise products, while BPOS applications are based on the 2007 editions. Office 365 also upgrades Communications Online to its next version, renamed Lync. "I can't wait," he said. "If I had a choice, we'd do it tomorrow."

Of course, it remains to be seen how well Office 365 will do once it goes into general availability. Microsoft won't say when in 2011 it expects to release it.

"We want to make sure we release it when it's ready," said Tom Rizzo, senior director of Microsoft Online Services.

Meanwhile, competition in the market continues heating up from rivals like Google, IBM/Lotus, Cisco, Novell, Jive, Socialtext, Zimbra, Yammer, Box.net and Zoho, but Microsoft is confident it has a winner in its hands.

Rizzo gives Google credit for generating a lot of buzz for its Apps suite, which has been around for several years and is a sort of poster-child for cloud-hosted communication and collaboration software.

"Whenever anyone talks about the cloud, they talk about Google," he said. "They've benefitted from the conversation."

However, Microsoft remains unimpressed with the adoption of Google Apps, pointing to a Gartner report published in August that said that Google Apps for Business -- formerly called Premier -- accounts for less than 1 percent of e-mail usage in enterprises, which Gartner defines as organizations with at least 100 users.

"We're sitting here at Microsoft, scratching our heads, wondering where are the Google results? Where are the customers?" Rizzo said.

Google sees it differently, as the company loudly announces large deployments of Apps for Business as signs that the cloud model is the future. In that same report, Gartner praised Google for making "substantial progress in becoming a mainstream vendor" and said Apps' enterprise momentum has been "slow but steady."

Osterman shares a similar opinion: "Google has made great strides with Google Apps."

While Office 365 components, like BPOS, offer a subset of the functionality of their on-premise versions, they share the same code base and user interfaces, so they are familiar to end users and IT staffers, Rizzo said.

In this manner, organizations can have hybrid cloud/on-premise deployments of Microsoft collaboration, productivity and communications wares, depending on their preferences and requirements, Rizzo said. "We provide choice and flexibility," he said.

Other cloud-only vendors, like Google, give organizations "an IT ultimatum" where all software components have to be hosted, he said.

Eventually, Office 365 will also include Microsoft Dynamics CRM Online. In addition, an Office 365 version for educational institutions will be released next year and will be an upgrade to Live@edu.

With a variety of configuration and pricing options, Microsoft feels that Office 365 will appeal to organizations of all sizes. It will cost US$6 per user per month for companies with fewer than 25 employees, replacing Office Live Small Business.

Larger organizations with a broad variety of workers have several options, from basic e-mail at $2 per user per month to a top tier package of $27 per user per month which includes the full-featured Office 2010 Professional Plus on a subscription basis.

"This makes sense," Koplowitz said. "Given the breadth of capabilities they're offering and the different customer scenarios they're trying to entertain, one-size-fits-all wasn't a good option."

However, Mann sees a potential for trouble. "It's not unclear because the details are out there, but it's confusing and that could be an issue," he said, noting that other vendors have more streamlined pricing and packaging.

Microsoft must also make sure that its hosting partners are on board with Office 365, Osterman said.

Meanwhile, Mann would like more clarity regarding the level of integration with backend systems that will be possible with Office 365, compared with the custom integration that is possible with the on-premise versions of the products.

Mann also cautions that Microsoft must try to prevent as much as possible the several significant outages that BPOS suffered this year, which prompted the company to apologize, issue credits to customers and take corrective steps.

Rizzo forecasts success. "We're very excited with the momentum we're seeing," he said.

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