Office 365, A Path to the Cloud for SMBs?

It is a well-known fact that every new platform or major shift in technology requires a killer app. For PCs it was largely basic productivity apps such as word processing and spreadsheets and presentation software. While platforms have changed, these basic productivity apps maintain their killer app status.

Office 365 from Microsoft is a single suite that takes the popular, dominant Office applications and puts them in the Cloud. You can read the CNET review here. We believe this is a boon for SMBs. Over the years, these productivity apps have become very expensive as their capabilities have expanded. Even so, SMBs depend on these to such an extent that they bite the bullet and purchase these for every person in the office. With Office 365, SMBs can now shift that capital expense into the operating expense category, paying $6/month per user (for SMBs with fewer than 25 employees) for the suite of Office applications. These apps are not full featured online replicas of their desktop based kin. They offer limited functionality but the 80-20 rule applies here. The majority of functions most people need are in fact available. Even if an SMB does not shift all of its employees to Office 365, they can still save money by shifting part of their workforce that does not require the full featured desktop versions. In other words, why buy a Lexus when a Corolla will do.

One aspect that can be problematic for SMBs considering using Office 365 is that it forces a firm to move their domain to Microsoft or its partner hosting the solution. But companies that have already invested in a website will need the help of a Microsoft partner to make Office 365 work for the organization without having to move the domain. And this is where Microsoft faces its largest stumbling block. For small companies, Microsoft does not have the infrastructure to support potentially millions of small businesses who may not have a partner or may not want to engage a partner. This begs us to question whether Microsoft is really committed to real small business. All signs point towards Microsoft focusing their efforts on gaining larger small businesses where they win more seats per deal. Really small businesses are the subject of a “breadth” marketing strategy which basically means that Microsoft will rely exclusively on partners or on the savvy of the small business owners themselves to sign up for and properly configure Office 365 services.

Some of the recent surveys conducted by Techaisle with Channel Partners shows that channels will begin reselling Office 365 although reluctantly. The first mover channels would be the ones that currently offer BPOS, Hosted Exchange, and Hosted SharePoint. These channel partners could be service providers or smaller VARs who are the trusted advisors to the very small businesses typically less than 25 employees.

Office 365 is a great idea and is a good first attempt from Microsoft. But a good product must be backed by the right support systems. This is particularly important when products are being provided as a service. It changes the fundamental nature of Microsoft’s conversation with its customers. It is not software anymore. It is a service.

Abhijeet Rane
Techaisle