Government // Enterprise Architecture
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4/19/2011
10:44 AM
Doug Henschen
Doug Henschen
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Microsoft Office 365 Signals Huge Cloud Shift

More than 100,000 organizations are signed up to test the vendor's new on-demand platform, suggesting email and collaboration could overtake CRM as the top services-based app.

A Look at Cost

As for Office 365, for small businesses starting with one to 25 employees (and topping out at 50 users), the cost will be $6 per user, per month. This package includes Exchange, SharePoint, and Lync services as well as access to Office Web Apps (lightweight Web versions of Word, Excel, SharePoint, and OneNote). It also includes a SharePoint-managed Web site and "Community Support," which means access to a knowledge base and discussion threads, but no phone support.

Enterprises get round-the-clock phone support as well as a few critical administrative controls not currently available in BPOS. For example, single-sign-on lets users sign on once and traverse sites and services provisioned on-premises or on-demand.

Role-based access controls let administrators use a single console to control which users get access to which resources and services, whether they're delivered on premises or on demand. The same goes for presence awareness for Exchange users, so you can see who's free and who's busy whether they use internal or external servers.

Enterprise services start at $10 per user, per month, which matches the current BPOS cost, but the latter doesn't include the single-sign-on and administrative capabilities described above. The next step up is $16 per user, per month, which adds access to the Office Web Apps, which weren't previously available with BPOS.

The Web apps are suitable for viewing and doing light editing of Office documents, but they're not the same as the conventional client applications. (As I'll explain in a moment, these prices don't include the full versions of the Word, Excel, and PowerPoint apps most closely associated with the Office name -- a point that has confused many customers.)

It's tough to compare software license costs to SaaS fees, given that the latter include behind-the-scenes hardware and operational costs. But at these prices, which will be presented during enterprise agreement renewal talks once Office 365 is released, even recalcitrant CIOs are likely to consider the options (and surely alternatives like Google's). By Microsoft's calculations, a typical midsize enterprise with 1,000 employees can cut IT costs by as much as $350,000 per year by moving to these services. That's counting hardware, operations (including people), and upgrade costs over six years.

Echoing reports we've heard from other cloud computing vendors, Microsoft says its on-demand scale and capacity utilization give it big cost advantages over most on-premises deployments. Results vary, says Microsoft, but customers using BPOS report savings of 10% to 50% over on-premises costs.

There are well-run IT shops that are highly automated and have maximized capacity utilization. But these tend to be among the largest organizations, with tens of thousands to hundreds of thousands of users, says Microsoft. There are also organizations that, for security and governance reasons, will keep all or most of their email and collaboration capabilities on premises.

Microsoft can point to a 99.9% uptime guarantee and plentiful security provisions for Office 365, but the trump card here is choice. Customers can remain entirely on premises or manage a hybrid deployment as a single environment.

David Michael, the CIO at UBM TechWeb, a unit of London-based United Business Media, the company that publishes this site and InformationWeek magazine, says he and other IT execs in the company are currently looking for a companywide replacement for a mixed bag of email deployments. Michael wants to move as much as possible into the cloud, but he says he has found that he'll have to keep email for the company's top executives on-premises.

In another complication, email for certain business units in Europe has to remain outside of U.S. data centers, due to concerns (and related policies) in some countries that the U.S. Patriot Act could subject private data to U.S. Government scrutiny. What's more, UBM will have to use an on-premises deployment as a long-term staging area from which to move mailboxes into the cloud.

Michael has looked at both BPOS and Office 365 (as well as competing alternatives), and the pricing from Microsoft has been aggressive, he says, though he can't cite figures because of nondisclosure requirements. Things got that much more aggressive, he says, when he mentioned he was looking at Google Apps. Michael also mentioned to Microsoft the prospect of InformationWeek editors writing about their Office 365 experience "so I told them it better work," he says.

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