UCStrategies Experts Discuss Availability of Microsoft Office 365

In this Industry Buzz podcast hosted by Marty Parker, the unified communications experts of UCStrategies discuss Microsoft's announcement regarding the availability of Microsoft Office 365.

The UC Expert panel also includes David Yedwab, Don Van Doren, Michael Finneran and Art Rosenberg.

Marty Parker: Hi, this is Marty Parker with UCStrategies and I am here with a number of my peers and colleagues to talk today about the announcement this morning, hosted by Steve Ballmer himself, that Microsoft Office 365 is now available in 40 markets, so basically available globally for all practical purposes. Microsoft Office 365, just to say what it is, is the cloud-based availability of Microsoft Exchange, Microsoft SharePoint, Microsoft Lync, and Microsoft Office Professional. So that includes of course, all of the Office Suite - Word, Excel, PowerPoint, etc. So what it is now possible to do for prices ranging from two $2 to $27, per user per month, depending upon which of the feature sets people want to use - allows people to have the desktop software capabilities needed in most businesses available to them in the cloud. Now an enterprise can do something entirely in the cloud, which Microsoft hopes will appeal to small and mid-sized businesses or there is the availability or the option to have some of an enterprise's users on Office 365 in the cloud and others on the premise-based products on premise. So you can still run your traditional servers and put field, or work-at-home, or supply chain partners or others in Office 365. Of course, that will lead to a number of questions and we are going to hear more about that a little bit later in the call. This has been getting quite a bit of "wringing out" as they say; Microsoft is known to run long beta cycles, and during their beta cycle, they claim that 200,000 organizations have signed up and begun testing it.

Now, a couple of things aren't in this yet. For example, live telephony even though they have Microsoft Lync online, it excludes the enterprise telephony portion. It has peer-to-peer communications, pc-to-pc, but not the telephony portion. So there is some work to be done there. It does include conferencing, voice, video, and web conferencing, just as they've done with Microsoft LiveMeeting for some years, but there are some boundary conditions still. They say those will be addressed in the future and perhaps the Skype acquisition will be part of that solution.

They also in their announcement surprised me by saying how many partners around the globe are working with them - service provider partners, to be specific. So they mentioned Bell Canada, Intuit Inc., and NTT Communications, Telefonica, Telstra, Vodaphone - I mean these are major organizations with millions of customers each. So that's not a trivial announcement that these people will be packaging and operating Office 365 in conjunction with their own services. So we'll see how this progresses, but it appears that Microsoft has put the best of their software out there into the cloud. And of course, we all realize it's not only a Microsoft initiative, but in response in part to things like GoogleDocs and other tools that are coming forward - some for free and some with modest charges on them.

So with that, let's talk about some of the challenges that go with this. I am going to call on my friend and colleague, David Yedwab, who has a bunch of questions, right David?

David Yedwab: Yes, thank you Marty, and actually, before we start with a question, I think I might like to correct something you said - while Office Professional is included as part of the enterprise options of Office 365, Office Professional still needs to be on-prem in that environment. It's not in the cloud. Only Office Web Apps are in the cloud.

Marty Parker: Good correction, you're right.

David Yedwab: But let's start talking about some of the questions that I think this announcement raises around the UC&C (unified communications and collaboration) space.

• First, most interesting, is what types - sizes, geographical spread, verticals - in terms of customers will migrate some or all of their UC&C services to a Microsoft-hosted cloud?
• And then, what does that mean in terms for on-prem UC&C solutions, as well as competitive cloud UC&C solutions from the 650 Broadsoft and other partners around the world that are offering hosted UC&C solutions?
• What impact is Office 365 going to have and perhaps most importantly, on Microsoft's Office cash cow? Is this the biggest risk to Microsoft since the anti-trust case started over a decade ago?
• How are the other leading players in the UC&C space going to respond, compete, cooperate - obviously one of my favorite topics - interoperate - or both, with Office 365?
• And perhaps most important is how will Microsoft's immense channel react and adopt to being a reseller of monthly recurring services versus selling stuff and implementing that stuff that's been their practice for over 20 years? I think that's going to be the most dramatic and we will certainly learn more about that at the upcoming Microsoft Worldwide Partner Conference in a week or so. With that, let me turn it over to Don.

Don Van Doren: Thanks very much, David. Really good points and I think the kinds of questions you are asking are exactly the sort of thing that people will have to be looking at and sorting through over the next couple of months, and frankly, even longer. I would point out one thing though, you mentioned a lot of risks and the risk potentially that could put in jeopardy what has been the engine of Microsoft's growth for many, many years. I would just offer that another risk and maybe even a bigger risk of that is that companies and especially ones that are in a dominant position, get complacent about the market that they have and they fail to take notice of and react to underlying shifts in the market. Clearly, the move toward hosted solutions and cloud solutions is, I think, a good example of the kind of potential risk that could be attacking the underlying Microsoft Business Model. And so in some sense, they've gotten out ahead of that wave and are offering some opportunities and ways that they can move into that kind of an environment.

I think one of the things to look at very carefully of course, is going to be how will this work in a hybrid solution? That is, a situation where an enterprise especially has perhaps on prem solutions, as well as hosted and cloud offerings that they are using. Potentially, for example, support remote workers or an increase in the teleworking environment. There are a lot of issues like this, but I think in general, I am pleased to see Microsoft take this initiative, but at the same time you are right, there are still a lot of questions out there. What do some other people have to say?

Michael Finneran: Overall, I am pretty encouraged with what I heard from Microsoft this morning. Of course, this does set off the battle of the cloud giants. This is clearly going to be Microsoft against Google. And of course, looking as I always do from the mobile angle, it certainly looks for the moment that Google is way ahead in terms of mobility, with the uptake we have seen in Android, and the desire to integrate that with their cloud-based solutions - that's going to give them a big leg up. Of course, Microsoft's great strength is their dominant presence among enterprise customers, the strong desktop, and as Marty mentioned, the channels. So overall, I think Microsoft's got a real strong offering, but they better catch up with the mobility stuff, or the world will be leaving them behind.

Also, as David had mentioned the concern about the impact on the cash cow Office business - I think it's critical to Microsoft's success that if somebody is going to kill that business, Microsoft should be killing it themselves and not leaving it up to somebody else.

Art Rosenberg: The thing that I see as a big challenge for everybody jumping into this hosted service kind of thing is going to be what we've been calling CEBP, where we have applications that initiate contacts with people. And this could be people outside the organization, business partners, customers, - it will impact the call center operation and so on, so the application for self-service applications are going to come into play. The question is, how are those applications going to be developed, by whom, using what tools, and what kind of environments?

Marty Parker: Right, very good questions. I think raising all these questions is really important so that everyone in the industry is able to think through them as they make their decisions. Maybe I will just add a few comments on what's been said. We did get a briefing during the beta test period about licensing and about channels. The channels will receive compensation for subscriptions that are made by their enterprise customers. So just as today, licensing for Microsoft products are purchased from, say CDW - not from the VAR - the VAR is able to see that transaction, be associated with that transaction, and get some credit for the sales efforts that they put into it.

We'll see the same model, I believe, in subscriptions. We at UniComm Consulting have been buying our Microsoft LiveMeeting subscription through a Microsoft VAR for the past three years and I expect that company will be here to sell us Office 365 going forward. By the way, we also buy WebEx subscriptions and so forth, it's not about any one company, it's about what our customers prefer.

I'd also comment that in terms of the other companies to consider in terms of responses, as David Yedwab brought up so well, IBM Lotus Live has been out there for some time, moving along this path of hosted services. So I would not underestimate them as a player. In the telephony world, we've seen Siemens, Mitel, coming forward with some very attractive hosted options and Cisco, of course, through their WebEx arm is a major player in this world. So it is going to be a battle of the giants, I think one of you said. I think that's a very appropriate phrase, "a battle of the cloud giants," Michael.

And then hybrid solutions are going to, I think, open a new services model. We saw an announcement just yesterday from a company called Azaleos, who is a managed services company, talking about their hosted managed service for the hybrid and implementation of an Office 365 and on-premise Microsoft enterprise. So I think we'll see some new services popping up in that regard.

And finally, I'll add a comment on the licensing models - Microsoft has a good amount of experience already with the possibility of recurring licenses to enterprises in the form of Microsoft Dynamics, which has been a hosted service from its onset. And Microsoft Dynamics we could note, might be seen as a response to the likes of SalesForce.com and others, but it just proves that, as SalesForce.com has proven so well, along with Microsoft Dynamics, that these kinds of recurring subscriptions for hosted services are real and are valued by investors and are profitable. So I think that maybe Microsoft has more experience than we imagine in making this transition. And they may or they may not, but I think they will find that giving customers the choice of two options, licenses or subscriptions, is actually going to broaden their market and may even increase their revenues and profits. But as David said so well, it's yet to be seen, we'll watch.

Art Rosenburg: Just a quick questions of terms of where is it all going and its effect on the SMB market, which is much bigger than the large enterprise market because of the numbers of potential customers.

Marty Parker: Yes, that will be an interesting thing to watch. Gartner has published one of their market launches, I think it's called Pieces on IP Telephony in the Small and Midmarket - and Microsoft Lync was one of the 10 companies that they evaluated. But it was positioned as 250 users and up, perhaps because of the numbers of servers and gateways and so forth that were required. So you are right, Art, Microsoft may be hoping this will bring them more into the smaller-sized businesses. Many of the cases that were featured on their webpage today when they made the announcement were pretty small businesses - restaurants and small wholesalers and those kinds of businesses featured as adopted this already.

Don Van Doren: I think that as we discussed on the podcast a couple of weeks ago, the SMB market is clearly one for which cloud-based and hosted-base solutions can be extremely attractive and again. One of the reasons behind this is just the ability to get away from the maintenance and the ongoing onsite support that has to happen with traditional on-premise solutions. So again, I think this is going to open up a very interesting opportunity for Microsoft in the SMB marketplace.

Art Rosenberg: One last question is how will it merge in terms of business opportunities, with the consumer market in general that is moving towards using UC just for social contacts, especially social networking, because that's a market right there and somebody has to be responsible for bringing the technology to that large segment of the world.

Marty Parker: Consumerization is always a surprising and glorious thing to watch, Art, thanks for bringing it up again. So thank you all for your time today and we appreciate you listening to our podcast about the launch of Microsoft Office 365. Thank you.