Amy Wohl's Opinions

Microsoft Office 365: The Competition is On

On Tuesday, Microsoft announced its on-line office productivity and collaboration suite, Office 365.

The reaction seems divided.  Many are fairly certain (I agree) that for existing Microsoft Office users (who already have their desktop Office software), this will be an obvious path to the cloud. Others look at the architecture, particularly the relationship between desktop Office and the Office Web Apps in the cloud and note that this isn’t really a cloud architecture. (They’re right.)

For smaller firms who have never been able to justify implementing and supporting Microsoft Exchange and Sharepoint, this can be a great opportunity to enjoy the features of these products, integrated with Office, without the need to provide an in-house IT staff.

The devil, of course, is in the details.

• Microsoft offers 11 different plans for professionals and small businesses, enterprise customers, and education.  This is at least confusing.  It can also require a crystal ball, since Microsoft warns that it is not possible to trade up from a small business offering to an enterprise offering (with its additional features and “real” support);users must cancel their small business Office 365 plan and purchase an enterprise plan.  Information loaded into the small business version will have to be re-entered (although I’ll take a bet that someone will figure out how to ease this process pretty quickly).

• The Office Web Apps are pretty anemic versions of desktop Microsoft Office.  They exist mainly to permit collaboration on-line and storing accessible documents in the cloud.  Microsoft is assuming that creating or editing complex documents will likely take place in the richer desktop environment. (Note:  it is possible to create or edit a document in the cloud; it’s just limited.  Microsoft can replicate its rich desktop formatting for documents accessed through Office Web Apps.
• Microsoft would not only like you to be a desktop Office user, they would like you to upgrade to Office 10 Professional Plus, with its retail price of $499.99—upgrades are cheaper.  (Of course prices in volume, especially in enterprise volumes, are much cheaper, but then there’s the need to do the upgrade implementation.)  This is required to get you to the advanced features.  In the appropriate plans, users will be offered an opportunity to download Office 10 Professional Plus 

Pricing Plans vary from $6 to $24+ per user per month.  Note that these pricing differences mount up when you compare them to annual usage costs.  We’re guessing that large enterprises might get discounts.

User Population	Price Per User Per Month	Support
Individual Professionals and Small Businesses (up to 25 users)	$6	Moderated Community Support (you post your question on a bulletin board and wait for someone to help
Enterprise Users; may include a copy of Microsoft Office Professional Plus	$10-$24+	24/7 Microsoft support

All of the plans include some level of access to Microsoft Exchange, Sharepoint, and Lynch (a synchronization service.

Google stepped right up to the plate, announcing new features and denouncing Microsoft’s offering as not being a true web product (technically correct).  But Google can rest on the fact that it’s hard to beat free, and their paid support price is $50 per user per year. 

Google customers who are satisfied with the level of function in Google Apps are unlikely to decamp.  Especially since Google has just started to spin out its social network software, to be used from within Google Apps.

It’s clear that the move to on-line collaboration is on and that collaboration will be used much more widely on-line than it ever was in internal or external networks – it’s just so much easier.  I’ll be writing a research note on the Collaboration Market in a few weeks.   If you’re reading this blog, you’ll find a link to it here.

Microsoft in the Cloud

Recently, Information Week published a condensed transcript of a June 9 interview with Steve Ballmer, a follow-on to an interview the year before.  The interview is about Microsoft’s view of how it’s doing overall, but especially how its cloud strategies are coming along.

It’s clear that Microsoft has made a number of commitments to the cloud environment and executed on many of them.  What’s less clear is what Microsoft, e.g., Ballmer, is willing to say about just how well Microsoft is doing in the cloud and whether their cloud status in June 2011 is living up to their expectations.  Ballmer makes the expected swipes at private clouds (are they really clouds or just data center virtualization – a fair question) and notes that moving enterprise computing to the cloud, beyond moving some office and collaboration applications for information workers, may occur more slowly than anyone had expected.  (We’d note a fair number of exceptions, we think, to that statement, especially in large enterprises and governments.)

But the statement that got my attention – and set me to sitting down and writing this blog post – was Ballmer’s statement that “It's only a good day when a lot of Windows PCs sell.” 

I’m having some difficulty in integrating that statement with what I can observe going on in the cloud (and Microsoft’s cloud activities).

1. Cloud computing doesn’t require a PC (Windows or otherwise) at the other end.  While it is true that most of us are accessing the cloud today (especially when we’re at the office) from a desktop or laptop PC and most of those PC's run Windows, things are changing.  If I’m going to the cloud via a web browser (Microsoft’s or another), the operating system is largely irrelevant to what I can do in the cloud.  If I’m using a tablet or a SmartPhone (and increasingly that will be the devices of choice), a simple assessment of the operating systems those devices employ makes it clear that I am unlikely to be using Windows.
2. Steven J. Vaughan Nichols has recently said that unless Windows 8 establishes itself on the tablet and SmartPhone platforms we may be looking at the end of Windows’ dominance in the marketplace.  (He goes on to note that since Linux underlies a lot of what goes on in the Android, Chrome, and other non-Windows device platforms, Linux is the winner here but that is a matter of definitions.  Given that Android employs Java, perhaps this is not entirely a Linux environment?  And, in any event, the unseen Linux on these devices is barely known to most users.)

It seems to me this must mean that Microsoft is sticking by earlier statements that the right way to access and use the cloud is in combination with a PC running Windows.  Of course, that works just fine, but when you count the growth rates of tablets and SmartPhones versus the growth rates of any kind of PC (desktop, laptop, or netbook), especially from a global rather than a North American perspective, it seems likely that in a few years (absent a stunning Windows 8 success on the SmartPhone and tablet platforms) we will be using small, lightweight devices with powerful tools, but little need to store data locally. 

I’m hoping that at the office announcement of Office 365 later this month, Microsoft will make it clearer just how we should slice and dice its commitment to the cloud versus its ongoing commitment to the Windows operating system.  (Both continue on, of course; it’s a matter of resource allocation and company positioning.) 

Of course, being an analyst, I’d like some numbers.  As Ballmer stated in the Information Week interview (which is definitely worth reading) it’s hard for a large, public company like Microsoft to give out those kinds of numbers (because the Street takes careful notice and then punishes companies who are less than accurate predicting the future).  But just some indications of direction will be very useful in assessing Microsoft as an important cloud vendor in an increasingly crowded field.

In the last two years we’ve seen enterprise vendors like Oracle and HP join IBM in stating their strong cloud intentions and starting to provide substantial cloud offerings as well as dozens (probably hundreds) of carriers and smaller regional players in every part of the world.  It’s going to be a very competitive market.