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Microsoft Office 365 adoption takes off, war with Google apps rages on

Paul Rubens | Jan. 23, 2015
Microsoft's efforts to overcome concerns about adopting its cloud-based Office suite seem to be paying off. Now the company is focusing on fending off the challenge from Google Apps.

Office 365 migration path

Microsoft's cloud-based Office 365 is the company's fastest growing commercial product ever, and adoption shows no sign of stalling. The company's cloud revenue (which included Azure and Dynamics CRM as well as Office 365) grew 128 percent in the most recent quarter compared to the same period last year, and the number of Office 365 commercial seats in use nearly doubled.

If there was a suspicion that Microsoft might have picked most of the low hanging fruit -- companies that found a cloud-based Office solution particularly attractive - and that it would now struggle to find new customers, the facts seem to refute this.

The truth is that the number of Office 365 users continues to grow strongly, Microsoft is signing up companies of all sizes and Office 365 revenues are fairly evenly split between domestic and international markets.

"Pretty much everyone is considering Office 365 now," says Jeffrey Mann, a research vice president at Gartner. "They are at least thinking about it, even if they don't end up adopting it. Adoption was going in fits and starts but now it is really starting to take off, and bigger companies are implementing it."

One reason for this may be that as larger companies' Enterprise Agreement licenses with Microsoft run out, many are taking the opportunity to move to the cloud-based system, he believes.

Some highly regulated industries and some specific geographies are still resisting moving to the cloud though, however. "If you are involved in drug safety, or the nuclear industry, or something like that, then you are probably not going to be looking at moving to the cloud," says Mann. And some governments -- particularly Germany, Switzerland, Russia and China -- are also anti-cloud, especially from an American company.

Security Concerns Persist
TJ Keitt, a senior analyst at Forrester Research, points out that suspicion about cloud solutions continues to persist. "There are still concerns about privacy and security in multi-tenancy environments, and Edward Snowden hasn't done anything to reduce this," he says.

Kennametal, a Pennsylvania-based supplier of proprietary materials and tooling technologies, provides a good example. "Our legal department had security concerns about putting our data in a multi-tenant environment," says Steve Hanna, the company's CIO.

But after legal staff participated in some cloud seminars and joint discussions with Microsoft these concerns were addressed, and the company adopted Office 365 for about 7,000 staff members.

Forrester's Keitt adds that many enterprise IT departments also have concerns about the possible ramifications for themselves if they move to Office 365. "What does the transition look like? What happens to jobs? What about control over the IT infrastructure? These are all concerns," he points out.


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