Microsoft Releases Office 365 to Stake Claim to Cloud Productivity Software Space

Microsoft Corporation consolidated its position in the productivity software market on Tuesday with the market release of Office 365, the online version of its Microsoft Office suite of software applications such as Microsoft Word, Excel, PowerPoint and OneNote. In releasing the market version of a Beta product circulated in the fall of 2010, Microsoft goes head to head with Google Apps in the competition for enterprise market share from businesses seeking productivity and collaboration tools. Although Office 365 has the potential to cannibalize sales of the popular desktop Microsoft Office suite, Microsoft predicts net revenue from its productivity software will increase as a result of business subscriptions from small to medium sized businesses. Speaking of the product’s target market, Microsoft CEO Stave Ballmer noted: “Office 365 levels the playing field, giving small and midsize businesses powerful collaboration tools that have given big businesses an edge for years.”

In a manner similar to Google Apps for Business, Office 365 allows multiple users to simultaneously edit the same documents and access them from web enabled devices including smartphones. Office 365 is priced anywhere from $2/month per user for email services to $24/month per user for the most powerful versions of the Office productivity suite and Exchange, SharePoint and Lync Online. Office 365 for Small Businesses, intended for a maximum of 50 users with “minimal IT resources,” is aggressively priced at $6/month in comparison to Google Apps, at $5/month per user. Microsoft’s entrance into the cloud based productivity software space was not lost on Google. Shan Sinha, Google Apps Product Manager, noted in a Google blog post that Office 365 was designed for individuals whereas Google Apps was conceived for teams; that Office 365 is optimized for Windows PCs whereas Google Apps works well on virtually any web enabled platform; and Google Apps is optimized for cloud based deployment whereas Office 365 represents “legacy, desktop software,” that has been transferred to a data center and labeled “cloud.” “Apps,” Sinha notes, “was born for the web and we’ve been serving hundreds of millions of users for years.”

Analysts are divided as to who holds the advantage between Google and Microsoft in the productivity software space. On one hand, Google holds a competitive edge both in terms of first mover advantage and the free version of its productivity suite, Google Docs. Microsoft, nevertheless, dominates the productivity software space with 90% of the market and a customer base that is familiar with and loyal to its software. That said, questions remain as to whether Microsoft can ameliorate the problems that caused outages of the precursor to Office 365, the Business Productivity Online Suite (BPOS). Google clearly has more experience and skill with large scale cloud deployments although it remains to be seen how convincingly its productivity suite can gain traction in the enterprise space.


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