Yesterday, Microsoft announced Office 365 – a rebranded and consolidated version of its existing Office Live Small Business, BPOS and Live@edu online services.  It seems ironic that this should come in the same week that the company announced the loss of Chief Software Architect, Ray Ozzie, the man whose Internet Services Disruption memo has, arguably, led to Microsoft’s reinvention as a software plus services company, embracing online services as a key part of its portfolio (even if the majority of its revenues still come from traditional models) but it is an acknowledgement that Microsoft is serious about cloud services.

Encompassing SharePoint, Exchange, Lync (formerly Office Communications Server) and Office (Web Apps and Professional client), Office 365 is certainly an interesting proposition for small businesses.  I use Google Apps (free) right now, but at $6 a month, Office 365 is almost free, and if that price really does includes a full copy of Office Professional (for as long as I’m a subscriber), it’s a steal.

Microsoft says that Office 365 is suitable for an independent professional, for a small business (up to 25 users) or for a larger enterprise. How can one product suit all needs?  The answer, is that it can’t.

Instead, what Microsoft has done is to package the Office 365 service for two distinct markets:

• Office 365 for Small businesses and professionals is aimed at 1-25 users, with Exchange (including a 25GB mailbox), ActiveSync, SharePoint (single site collection), Office Web Apps, a public website, Online Access databases, Lync client, online meetings, desktop sharing, multiparty instant messaging and PC-PC calling, a 99.9% uptime guarantee, and self-help/community support.  All for $6, per user, per month.
• Office 365 for Enterprises is aimed at larger organisations, and those where they need ActiveDirectory Sync, e-mail archiving (e.g. for legal compliance), Blackberry connectivity (Blackberry Enterprise Server), more than 50 users in the organisation, and 24×7 phone support.
  • Furthermore, the Enterprise plan is divided according to worker roles, so that Microsoft can provide different services for different groups of users (at different price points between $2 and $27 per user per month, list price – although volume discounts will be available).

So, what were the other highlights in yesterday’s announcement?

• Microsoft is claiming that Office 2010 is the “fastest selling version of Office in history” [really?]
• Microsoft’s existing online services serve millions of customers in 40 markets worldwide.
• 167m messages are sent per day from Microsoft’s cloud services [I’d be interested to see the source/scope for this… Microsoft often includes everything right back to Hotmail in its interpretation of cloud services].
• Office 2010 was designed for on-premise and cloud capabilities.
• Office 365 is currently in a limited beta and will “ship” worldwide next year.
• Office 365 always runs the latest version of Microsoft’s Office software (SharePoint, Exchange, Lyn, Office Web Apps and Office Professional Plus).
• Microsoft sess software as 15% of overall IT spend.  By moving into online services they increase market share by picking up some of the infrastructure revenue; but claim cost savings of 10-50% for customers.
• Partner opportunity is to expand reach and grow revenue by helping customers to use the software and not just deploying it.  Hybrid on-premise and cloud solutions could be an opportunity.

Office 365 is an interesting development.  As a customer, I think it’s very interesting and a more than credible alternative to Google Apps.  As a partner, I’m less convinced but that’s not a conversation for the public Internet.  Either way, it shows that Microsoft is serious about competing and the move to subscription-based services is starting to get moving.