Redmond bowing to the inexorable march of cloud computing...
Microsoft has bowed to the inevitable and announced it is making its Office suite available as a subscription service in the cloud.
The new cloud offering - called Office 365 - launched in beta yesterday, with full worldwide launch in 40 countries planned for next year.
Office 365 will see Microsoft's productivity suite bundled up with its collaboration, email and unified communications web services SharePoint Online, Exchange Online and Lync Online. Microsoft Dynamics CRM Online will also be added to the offering next year.
Businesses are no longer asking whether they should move to cloud, according to Kurt DelBene, president of Microsoft's Office Division, speaking at the launch of Office 365, "but when and what to move".
"We are unequivocally at a pivot point in the adoption of cloud services," he added.
Microsoft will be offering two flavours of Office 365 - one for SMEs with up to 25 employees, and one for enterprises. The latter will include a sliding price per seat scale to cater for different types of users.
The list price for Office 365 for enterprises starts at $2 per user per month, for a basic service offering email functionality, rising to $27 per month for a fully featured productivity suite suitable for a C-suite exec. Volume discounts can also apply.
"One size does not fit all in this segment," said Chris Capossela, vice president of Microsoft's Office Division. "[Office 365 for enterprise offers businesses] a single platform for all their users. You're not going to use one company's solution for as certain set of users and another company's for another. That's a management nightmare."
Office 365 for SMEs will cost $6 per user per month - and will allow start-ups, entrepreneurs and SMEs to tap up the same enterprise-grade software as larger competitors, said DelBene. "They can compete with those large organisations immediately - right out of the gate," he added.
Redmond is also including...
...a 99.9 per cent uptime money-back guarantee for Office 365.
By putting Office in the cloud Microsoft is potentially leading one of its most lucrative cashcows to slaughter. Philip Carnelley, research director at analyst house TechMarketView, said that Office currently generates around $18bn in revenues per year - with the Office business accounted for almost half of Microsoft's total operating profit last year.
Moving to a software as a service (SaaS) subscription model is necessary for Microsoft to compete with the likes of Google and IBM in the office productivity sector, according to Carnelley, but "will squeeze margins" in Redmond.
"Microsoft can't afford to lose share but it also looks clear to us that moving to a SaaS solution - with its pay-as-you-go flexibility, the need to provide huge datacentres to support the applications and storage - will squeeze margins. More than that, a SaaS offering which only requires a browser means it'll become easier than ever to switch providers, which will impact on prices, further lowering margins and revenues," he said in a statement.
"This was a necessary step but the debates in Redmond must have been fierce," Carnelley added.
Microsoft's Capossela claimed Office 365 represents new business opportunities for Microsoft both at the low end - in reaching the IT department-less customers that they've never reached before - and also in the enterprise sphere as the company broadens its offering.
"Traditionally Microsoft has only competed in the software space which is about 15 per cent of any IT budget," said Capossela. "With Office 365 and out other cloud services we're actually now in much larger pool of IT spend because we're actually running a company's infrastructure."
In addition to Office 365 for SMEs and enterprises, Microsoft said it will launch Office 365 for education next year to target the academic community.