Another factor weighing against Office 365 that shouldn't be underestimated is that, in many cases, the operational teams that could be reduced if Exchange, SharePoint and Office are moved into the cloud are the same ones that have a role in making the decision to migrate to Office 365. Few people make decisions that are likely to make themselves redundant.
Given all of the above, Koehler-Kruener says that lack of clear functional benefits makes selling Office 365 to organizations very tough for Microsoft. "You really have to ask yourself what the added value of Office 365 is when the client already has an on-premises deployment," he says. "It's fairly easy to see the benefits of Hosted Exchange, but what exactly are the benefits of cloud-based versions of Excel, PowerPoint and Word? It's really not clear."
Koehler-Kruener may have a point: Exchange Online has broadly the same features as enterprise-hosted Exchange, but while SharePoint Online offers almost all of the collaboration and workflow features of SharePoint on premises, it lacks several features like business intelligence. And voice, a key value point of Lync, is still unavailable for Office 365 a year after the service's launch.
Office 365 Earns High Marks in Education
While enterprises may be hesitant, Office 365 has met with considerable success is education. There are a number of reasons for this, and perhaps the key one is that Microsoft offers it for free or at a huge discount to the enterprise rate. (Microsoft probably has little choice but to offer it with heavy discounts: Google--its major competitor in the education space for cloud-based productivity services--offers its Google Apps for Education service free.)
Another reason that a cloud-based service is attractive to educational establishments is that students move through the system so quickly--a university student will typically spend four years at the school, so 25% of the student body is replace every year. (It is rare that an enterprise would have staff turnover this high.)
This makes license management, and particularly license retrieval, hard if students are issued installed versions of Office software. By moving the product to the cloud, de-provisioning the service from groups of students when they leave can be done automatically simply by disabling their Office 365 accounts.
There's another economic factor at work here, too, and that's to do with the fact that educational bodies receive large subsidies for their Internet connectivity. "Our WAN circuits are the least expensive component of our network--they are cheaper than our LAN," says Richard Charlesworth, CIO of the Tennessee Department of Education. "That's the complete reverse of what you see in an enterprise. It means that a cloud service like Office 365 is uniquely aligned to K-12 because it gets traffic off our LANs," he added.