Microsoft Online Services goes live worldwide 2 March, 2009 By Liam Lahey

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"These services open up new possibilities for businesses to control costs while continuing to enhance the productivity of their employees," said Stephen Elop, president of the Microsoft Business Division. "Customers can save between 10 per cent and 50 per cent in IT-related expenditures as a result of deploying Microsoft Online Services."

Perhaps it's logical for things to go in the direction of mixed on-premise/hosted computing, and due to economic circumstances, that could push business in this direction more quickly than would otherwise be the case. Or maybe Microsoft's hosted business application packages present a problem for the software giant in terms of how to move to the new SaaS (software-as-a-service) model without prematurely cannibalizing its existing package-based model and income stream.

"Their biggest problem at the moment is not competition from companies like Google, its relative satisfaction with Office 2003 and an unwillingness to move to Office 2007 or Vista by both large and small business," said Rob Enderle, principal analyst, The Enderle Group. "This was partially due to Microsoft's decoupling Windows and Office after Windows 2000 which once formed a foundation to ramp both (IT, in particular, has not wanted to do a new version of Windows without a new version of Office because they don't want to touch the desktop twice). Microsoft's software assurance programs, which function like a subscription, lose value dramatically if companies don't want the new offerings. Ideally, Office would be a SaaS offering but it simply isn't ready to make that leap."

So this is Microsoft easing into the issue, he said, first by taking the components that are already tied to Exchange and making them services and bringing Office along in the 2010 or 2011 timeframe when the product and Microsoft are more prepared for the SaaS move.

"Partners are one of the reasons they are likely delaying. Right now their partners aren't really set up to move to a SaaS model for Office and will need time to adjust their services and offerings to take advantage of this future change," Enderle added. "Think of this as Microsoft starting to signal the move. So yes, initially this will surround hosted Exchange partners and Microsoft's own hosted offering but the market is moving to SaaS and channel partners will need to figure out what role they want to play in this move. Fortunately they'll have a couple of years but, regardless of the vendor, SaaS is clearly coming."

Microsoft said it is committed to providing opportunity for a global ecosystem of partners that would sell, customize and provide consulting, migration and managed services for Microsoft Online Services customers around the world.

"The pace that we grow our services business will be dictated primarily by customer demand for the services. It's taken a little time for our partners and the channel to digest the partner program we announced at WPC, but we feel good that partners are coming around now to better understand how they can take advantage of this shift in delivery model," said Bryan Rusche, senior unified communications product manager, Microsoft Canada. "The strong growth in the partner program for Microsoft Online Services (thousands of partners joining) is powerful evidence that partner concerns are shifting to enthusiasm for the opportunities in cloud computing and Microsoft Online Services.

"Microsoft believes hosted business services, delivered through partners, will extend and strengthen the current relationships partners have with customers. Additionally, Microsoft partners will continue to have, and are encouraged to utilize Microsoft Online Services to differentiate their offering by providing optimized migration, customization, consulting, training and support services, and development and integration for their customers."

Warren Shiau, lead analyst, IT research, The Strategic Counsel, said if an organization is under severe and increasing cost pressure it doesn't necessarily make sense to keep certain functionality sets in-house, specifically functionality that may be critical but doesn't necessarily have anything to do with creating or maintaining competitive advantage.

"The question is why keep these functionalities or parts of your infrastructure in-house, with all the associated cycle time and costs, if you can offload it in a way that's completely transparent to your users and to your on-premise IT, and it delivers cost efficiencies and frees IT resources? The question is there regardless of business size," he said. "The Microsoft part of it is that SMB IT infrastructure is Microsoft-based, and in enterprise the messaging/e-mail infrastructure is primarily Microsoft-based. This avoids the issue of switching solutions or vendors (which is half of things taken care of already), and turns the discussion toward how the solution is delivered, and what your money and IT resource costs associated with the solution are."

For the channel, he said any solution requiring customization would go to Microsoft's partners, and anyone who has a specific requirement for physical location going to be working with a partner.

"There are general market opportunities for partners coming out of this as well as specific partner-targeted opportunities," he said.

Meanwhile, the Deskless Worker Suite, including Exchange Online Deskless Worker and SharePoint Online Deskless Worker, would also be available to organizations globally. The Deskless Worker Suite is a low-cost solution designed for users that don't have access to messaging and collaboration capabilities.

"Microsoft Online Services is an opportunity to grow our business," Rusche said. "Two-thirds of new customers are moving to Microsoft Online from competitive solutions. We also are offering a broad choice of capabilities to new types of workers. With our Deskless offering, for $2 per user, per month, we can bring the right level of technology to occasional users like nurses, doctors, factory workers and delivery truck drivers."

Small business typically moves more aggressively toward programs like this because they are both more able to (less dependencies on current practices) and because they generally see the opportunity first because line management and IT functions are intermixed allowing them to move faster.

"Given these economic times are more dire than I have ever seen before, however, I can't be sure if this rule will hold true this time however," Enderle added. "It may well be that enterprise IT will have the budget to make changes like this still (since budgets tend to collapse slower in enterprises) and thus be better able to take advantage of it for productivity reasons."

Shiau said for small businesses that are operating with minimal IT investment, it's a discussion that could generate greater adoption of higher levels of IT functionality because we're into a discussion that starts addressing many of their adoption barriers: acquisition cost, running cost, IT resources required, compatibility/integration with the IT they do run, knowledge/familiarity with the vendor/solution, etc.

For mid-market and large business (if one disregards any issues around having to keep data/apps in-house for compliance/regulatory, etc.) it all probably boils down to a simple evaluation of what's more cost-effective. "One of the big examples that's probably going to come-up is someone who's facing a big Exchange migration, and sees the hosted solution as a way to take care of things at less cost, when they're having to deal with a a major squeeze on IT," Shiau remarked.

Exchange Online and SharePoint Online are available for trial in Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, the U.K. and the U.S. Organizations worldwide would be able to trial and purchase the entire Business Productivity Online Suite, including Office Communications Online, in April, the company said.

The Deskless Worker Suite would be available for trial and for purchase worldwide in April.

The standard version of the Business Productivity Online Suite is available from Microsoft for about $19. The Deskless Worker suite, including Exchange Online Deskless Worker and SharePoint Online Deskless Worker, will be available for approximately $3.82 per user, per month.