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.
As beta customers will soon find out, the hybrid deployment and administrative options go beyond single-sign-on and role-based access controls. Office 365 adds the SharePoint MySpace page not available in BPOS, and this personal profile and collaboration feature can be deployed in the cloud while integration-intensive SharePoint applications and customizations can remain on premises.

Similarly, extranet sites that need to be shared with partners and customers can be deployed in the cloud, while sensitive intranets remain on premises. Internal users with access to it all will have no idea which resources reside where, says Microsoft, because Office 365 delivers a seamless sign-on, access, and navigation experience.

Microsoft says Office 365 customers can expect regular updates and improvements to their services about every 90 days, but sometimes businesses don't like changes. Thus, Microsoft says there will be notifications about disruptive changes, and customers will be able to opt out for up to a year.

Adding Productivity Apps

The name Office 365 confusingly suggests that the Office suite has been moved to the cloud, but that's not the case. Enterprises can pay $24 per user, per month (adding $12 to the $16 per user, per month service level described above) to license Office Professional Plus (which includes Word, Excel, PowerPoint, OneNote, SharePoint Workspace, Outlook with Business Contact Manager, Publisher, Access, InfoPath, and the Lync communications client).

This is conventional, client-installed software sold on a subscription basis. For enterprises looking to turn capital expenditures into operational expenditures, it's an option that adds flexibility.

Office Professional Plus can also be purchased outright for $499 list (with volume discounts available). For those considering long-term costs, you'll pay for it in 42 months if you divide by the $12 per user, per month subscription fee. But at the $24 per user, per month level, Microsoft also throws in advanced archive capabilities, unlimited email storage, and hosted voicemail, so read the fine print.

Customers can also use lesser Office bundles with Office 365, such as Office 2007 SP2, Office 2010, or Office 2008 for Mac, but Office Professional Plus is the only bundled subscription option.

At the extremes of the Office 365 line, there's also a $2 per user, per month Web email and Web Office Apps option for "kiosk users" and a $27 per user, per month service that including everything in the $24 service, plus VoIP services to replace or supplement an existing PBX.

With its $6 per user, per month bundle for small businesses, Microsoft is going after Google's stronghold at the low end of the market. Indeed, Microsoft says about 70% of the 100,000-plus organizations signed up for the beta are small businesses, and it has skewed its messaging and marketing that way.

But there are also some 30,000 midsize and large enterprises set to try Office 365, and that could lead to hundreds of thousands of new on-demand users. The vast majority of beta testers are existing customers, says Microsoft. Once the beta period is over, they'll have 30 days to decide whether to stay entirely on premises (with new or old software), move some users onto one or more levels of Office 365 services, or walk away from Microsoft entirely (assuming any existing enterprise agreements have also expired).

Barring major service disruptions or other highly public failures during the beta period, my educated guess is we'll see a lot of the middle choice and a corresponding shift in the numbers of enterprises handling email and collaboration on demand.