Microsoft launches Office 365 with rates tailored to small business

After stumbling twice with offering productivity applications as a service, Microsoft Corp. is finally giving what those who dream of in a cloud service have always wanted: a full-featured Office 365.

The company will detail today the latest version of its online suite that uses a rich client that includes access to Word, Excel and PowerPoint, but now the client is offered as a service.

In pre-launch interviews Microsoft executives used words like “critical” and “a transformation of the Office business in the services world” to describe the new offering.

Vahe Torossian, vice-president of worldwide small and mid-market solutions and partners, said the increasing move by computer users to the cloud for all kinds of services lead Microsoft to “rethink and re-invent Office.”

The goal is to pull businesses away from buying Office as an on-premise application to buying it as a subscription, one that in Canada at least has been less than successful.

But to appeal to small and medium-sized businesses – which are the vast majority of organizations in Canada – Microsoft has created two new Office 365 offers tailored to SMBs:

Small Business Premium, aimed at companies with up to 10 users, priced at $160.80 per user a year; and Midsize Business, for up to 250 users, at $184.80 per user a year including access to online versions of Exchange, SharePoint and the Lync communications suite.

Subscribers have the right to use Office 365 on five devices, to reflect the fact that many people now have a smartphone, tablet, and laptop.

”What we anticipate will see a major shift in the way small and medium business buy technology in the future,” said Mark Dodds, Microsoft Canada’s vice-president of midmarket solutions. “We will move away from the on-premise idea of buying technology and driving the cost as a capital expense, to one where they’re buying a subscription-based technology and the cost is an operational expense.”

“People want to move to cloud. They want to move to applications that are refreshed, up to date and secure without having to buy new technology each time, or tied to a hardware refresh each time, and I think that’s a very suitable model for small and medium business.”

Wes Miller, a research analyst who specializes in server applications at Directions on Microsoft, calls the new Office 365 a “pivotal shift” for the company. “This is the vision that businesses – especially mid-size and larger—will look at and kick the tires and possibly start taking seriously.”

Not only is Microsoft looking over its shoulder at Google Apps, he said, it is also looking in the mirror at itself – at all of the customers who have older versions of Office on their internal servers who aren’t upgrading. Turning those to subscribers sending in annual revenue is the other target.

One thing in its favour, Millers said, is Microsoft’s ability to stream the new client to subscribers in a way that makes installation a matter of seconds (with a good Internet connection) so users can be up and running quickly.

“I think they have (Office 365) righter than they ever have before. I think it’s a really solid set of services. I think the desktop client experience they’re building is really compelling. The question in my mind is, is the pricing what customers are looking for.”

Torossian acknowledged that Google Apps is a competitor to Office 365– but the old version, not for the beefed up Office 365, he insisted. The new one announced today has more business capabilities, he said.

Microsoft has big ambitions for the new Office 365. Torossian believes that in 12 months it will be the fastest growing product for SMBs the company has had in a long time. In fact he predicts that in five years it will “by far outsell the on-premise versions.

To get that kind of sales performance Microsoft is opening up sales of Office 365 to its reseller and system integrator partners. These channel partners will be “fundamental to our growth,” said Dodds.

Until now small and mid-sized companies had to buy it direct from Microsoft , or through Bell Canada.

But now partners will be able to sell Office 365 subscriptions either individually or – as they’ve been hoping — bundled together with other Microsoft products and services and invoiced on one bill.


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Howard Solomon
Howard Solomon
Currently a freelance writer. Former editor of and Computing Canada. An IT journalist since 1997, Howard has written for several of ITWC's sister publications, including Before arriving at ITWC he served as a staff reporter at the Calgary Herald and the Brampton (Ont.) Daily Times.

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