After one year, Office 365 success unclear

Microsoft hasn't provided many concrete details about sales and adoption of the cloud email, productivity and collaboration suite

By , IDG News Service |  Software

A mixture of intense excitement and skepticism followed the launch a year ago of Office 365, as backers and critics debated whether the cloud collaboration, productivity and communication suite would succeed.

Skeptics said Office 365 was arriving too late as a unifying and superior replacement to weaker and disjointed offerings like Business Productivity Online Suite (BPOS), Office Live Small Business (OLSB) and Live@edu.

Microsoft and its supporters countered that it was still early days in the cloud collaboration, productivity and communication market, and that Office 365 would tower over competitors like Google Apps.

One year later, it's hard to say whether Office 365 has been a success or a failure, and Microsoft isn't making the task easier.

"We're not breaking out customer, user, or revenue numbers at this time," a spokeswoman for the company said via email, when asked for concrete metrics about Office 365's sales and adoption. She reiterated the "momentum" statement Microsoft has made previously that Office 365 is "on track" to be one of the "fastest growing offers" ever for the company.

One thing seems clear: Office 365 hasn't blown competitors out of the water.

"It hasn't swept the market by storm," said IDC analyst Melissa Webster.

She expects Microsoft to release concrete data about Office 365 sales once the product makes significant revenue contributions.

"They'll give metrics when the metrics are meaningful, demonstrating scale and depth," she said.

Beyond its ability to dominate -- or not -- the market, Office 365's success will also be measured against other criteria.

For starters, Office 365, whose most common configuration includes online versions of Office, SharePoint, Lync and Exchange, must help Microsoft make inroads into the small-business segment.

There, most prospective customers have lacked the money and expertise to buy and install in their offices products like Exchange, SharePoint and Lync.

It was in this underserved segment where Google Apps found most of its customers the first three or four years after its launch in 2007, attracting them with a free suite that included email, calendar, IM, productivity applications, a website builder and, for US$50 per user, per year, additional features, including IT management and security features.

Microsoft's offering, the free Office Live Small Business (OLSB), which focused on website hosting and email, couldn't hold back Google Apps, which currently is used by 5 million businesses, 66 of the largest 100 U.S. universities and government agencies in 45 of the 50 U.S. states.

It seems in this respect, Office 365 has been effective. According to Microsoft, more than 90 percent of Office 365 customers are small businesses with 50 or fewer employees.

"So many of these wins are new customers for Microsoft," Webster said.

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