Microsoft says Office 365 adoption accelerating, but questions remain

Analysts say Microsoft should provide more concrete evidence to back up its claim

By , IDG News Service |  Enterprise Software

When Microsoft reported its third-quarter financial results last week, company officials trumpeted several metrics about sales and adoption of Office 365, the cloud subscription suite for email and collaboration.

Specifically, Microsoft said that Office 365 "net seat additions" grew five times compared with the same quarter last year, and that 25 percent of the company's enterprise customers now have Office 365, which is now on a US$1 billion annual revenue run rate.

However, Microsoft isn't saying how many Office 365 seats it has sold. Moreover, the 25 percent enterprise adoption stat includes both instances where the suite has been widely deployed and scenarios where it may be used in a limited fashion.

"It's a big claim to say 25 percent of enterprises are using Office 365," said Michael Silver, a Gartner analyst.

CFO Peter Klein highlighted several times during the earnings conference call the Office 365 metrics, saying they reflect strong momentum and indicate that the suite "is really starting to get scale."

However, when he was asked during the question-and-answer part of the call if he could give a concrete number for users, he declined.

With this Office 365 momentum statement, Microsoft is trying to continue the buzz around the suite, which it sees as the future of its on-premises server products like SharePoint, Lync and Exchange, and of its desktop productivity applications likes Word, Excel and PowerPoint.

As customers who have those products installed in their servers and PCs are faced with the need to upgrade them, Microsoft wants to be there with its Office 365 cloud-hosted option, and prevent Google from swooping in with its rival Google Apps cloud suite.

However, the momentum claim would carry more weight if Microsoft backed it up with more specifics.

"It would be nice if Microsoft gave more detail because one out of four customers haven't moved to Office 365 to a large extent," Gartner's Silver added. "What you're seeing is probably a lot of trials. It's hard to tell what that number means."

One should also take into account that in the past six to nine months, Microsoft has offered various Office 365 incentives to channel partners and special prices to enterprise customers and consumers. It remains to be seen how sales and adoption will be affected once the incentives and offers end.

Another factor that could be boosting Office 365 adoption is upgrade migrations to it from several of its legacy cloud collaboration and communication suites like Office Live Small Business (OLSB), Business Productivity Online Suite (BPOS) and Live@Edu, all of which Office 365 has replaced or is in the process of replacing.

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