With the recent release of Office 365, Microsoft now offers a cloud-based subscription service that includes access to Exchange Online, SharePoint Online, its Lync collaboration service and -- in some packages -- access to Office Web Apps and a copy of the desktop version of Office.
At first blush, it seems like an interesting place to get your productivity apps from. Google Apps and Docs are popular among consumers, so it was only a matter of time before Microsoft entered the fray with a competitive offering. But as in any transaction, it’s good to understand the other party's motivations, as it may help you decide whether your ambitions are well served by Microsoft's key drivers.
So, why is Microsoft pushing the move to the cloud and Office 365? In my opinion, it comes down to these four items:
- Disintermediation. For years -- indeed pretty much its entire life -- Microsoft's products and services have been delivered through the efforts of others that control a lot of the end-user experience. From buying a PC and installing servers to building out a data center, Microsoft has been reaching customers indirectly through other businesses. With Office 365, it has an opportunity to sell its bread-and-butter wares directly to end customers. The company clearly sees an opportunity to disintermediate itself from the middlemen through its new service.
- Obstacle removal. The old joke is that your company's IT department is the "Group of No" -- the people who, no matter what you need and how much you need it, say, "No." Microsoft also suffers from these tendencies in its drive to push new technologies to customers. Something as simple as ActiveX controls, rich media platforms such as Silverlight and custom development platforms like .NET are examples of key Microsoft products whose adoption is slowed by the gatekeepers in corporate IT. Circumventing IT and providing a secure, hosted environment that is managed completely by Microsoft removes a huge obstacle to adopting new technologies -- especially as the push to cloud computing continues.
- Control over online identities. If you work for eight or 10 hours a day in the Microsoft world and your online persona is tied to a Windows Live ID, why wouldn't you link your Xbox, Windows Phone 7 and (now) Skype IDs to Microsoft's identity platform? It's easy for you and it's great for the software giant, which would then have a large population base to study, understand and probably sell advertising, search and other services.
- Recurring revenue. Take it from any venture capitalist: The most attractive business model, in terms of revenue, is one that highlights recurring revenue. By making its most popular software subscription-based, Microsoft can generate an additional stream of revenue off an existing code base and ensure that more users have access to new code (thus reducing support costs for older versions). Microsoft could also lock users into its way of business even more and gain control over the price of its own goods -- something it hasn't yet had in the retail channel. The user trades large upfront expenditures for software licenses -- or pretty large yearly charges for volume-license agreements that are confusing and hard to accurately size -- for a predictable monthly cost that takes care of licensing hassles and deployment. Is this a win-win situation? Maybe. But it's certainly a win for Microsoft.
ABOUT THE AUTHOR
Jonathan Hassell is an author, consultant and speaker residing in Charlotte, N.C. His books include RADIUS, Hardening Windows and, most recently, Windows Vista: Beyond the Manual.
This was first published in July 2011