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Office 365 'momentum' announcement met with some skepticism

Juan Carlos Perez | Dec. 2, 2011
Microsoft's declaration this week that Office 365 is enjoying unprecedented levels of sales success didn't fully convince some industry experts who were expecting the company to back up its claims with more concrete figures and who feel it's too early for a victory lap.

In other words, Office 365, which includes hosted versions of Office, Lync, SharePoint and Exchange, is designed so that it can leverage and interact with existing on-premise Microsoft software, especially the on-premise versions of those four main components.

As with most cloud software, Office 365 and Google Apps customers license the software on a subscription, per-user basis, paying either on a monthly or annual schedule. In addition, cloud suites like Office 365 and Google Apps claim to simplify and improve collaboration because files are stored on shared cloud servers where documents can be accessed by multiple users from anywhere and jointly edited.

This SaaS model, which reduces companies' upfront investment in software and hardware, as well as the time and effort involved in setting up and maintaining the applications, has been gaining popularity, especially among small companies with few or no dedicated IT staffers.

In fact, a big part of Microsoft's "momentum" announcement was devoted to trumpeting the fact that so far more than 90 percent of Office 365 customers are companies with 50 or fewer employees.

This factoid did resonate more with Webster. "The uptake so far from this new group of users -- who undoubtedly already had the Office desktop authoring tools, but hadn't stepped up to server products -- is promising," she said.

Nucleus Research, which has been contacting and surveying Office 365 customers, isn't surprised that smaller organizations find the suite appealing. "It gives them greater flexibility, access from anywhere and in many cases greater reliability than they'd have either running the applications on their own or with a separate hosting provider," said analyst Rebecca Wettemann.

"We're seeing a lot organizations be able to significantly cut the ongoing costs of support as well as the ongoing costs of upgrading licenses," Wettemann added. "Productivity is also a big area here too, so for organizations that have a lot of distributed workers, or who are working from different sites or traveling, it's a great way to provide full collaboration capabilities to them at a relatively low price point for SMBs."

Gartner's Cain points out that while Microsoft is happy with Office 365 adoption among small companies -- a segment of the market where Google Apps has historically been strong -- the emphasis is bound to shift upmarket.

"For now, the battle focuses on small companies, but we expect it to escalate rapidly into warfare over medium-size companies," Cain said.

Whether Microsoft provides more concrete details about Office 365 sales later on remains a question, but at, a Quebec reseller and systems integrator, Office 365 has so far proven a good addition to its menu of products.

"We have been pretty happy overall," said Steve Noel, the company's sales and marketing manager, in a phone interview, confirming Microsoft's assertion about particularly high interest among small companies.


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