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Microsoft launched Microsoft Office 365, a comprehensive cloud-based productivity suite that offers Microsoft Office, SharePoint Online, Exchange Online and Lync Online, for a minimum price of $6 per user/per month.
Microsoft's decision to group the services and offer it on the cloud comes a day after its chief software architect Ray Ozzie announced his retirement. Ozzie was considered one of the chief forces behind Microsoft's shift in focus towards cloud-computing, with his "Internet Services Disruption memo" seen as the turning point. The disruption memo resulted in the birthing of Windows Live services, Sharepoint Online, Exchange Online and Windows Azure.
The launch of Office 365 a day after Ozzie's retirement is an attempt to rest industry apprehensions about Microsoft's cloud strategy.
Microsoft's thrust on the Office 365 suite is to target small businesses as its pricing for small businesses reveals. It makes the service available to businesses with less than 25 employees at $6 per user. While for larger organizations it prices the services for as low as $2 or $1.75 to $27 per month for its full-featured Office.
The software-as-a-service (SaaS) offered by Microsoft seems like a re-branding of its Business Productivity Online Suite (BPOS). Microsoft will compete directly with Google's productivity suite Google Apps which is offered for $50 per user per year. However, by making its pricing flexible Microsoft will allow users greater flexibility in using the suite according to their convenience.
The Office 365 also bodes well for Microsoft's Windows Phone 7 strategy as it increases its appeal for enterprise customers. Also Microsoft Office offers users the familiarity of Office 2010 which is the same ecosystem it offers on the cloud as well which will dissuade customers from moving to other applications.
Since Microsoft offers a whole range of integrated services with Office 365, customers do not have to bother buying different office apps from different vendors, reducing the complexity of integrating services across various vendors.
Until now Microsoft's revenue model was based on licensing software but its move in the services allows Microsoft to create a new subscription-based revenue model. However, with Google in the fray and open-source suites like OpenOffice available, the move to the cloud will give Microsoft an early mover advantage.
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