Office 365: Sorry, folks. This is not Office in the cloud

Microsoft's Office 365 announcement this week was not about creating a new version of Office that will be hosted in/on/via the cloud (contrary to a number of headlines/reports you may have read claiming this).
Written by Mary Jo Foley, Senior Contributing Editor on

Microsoft held a 30-minute press conference on October 19 to unveil its strategy for planned upgrades to its Business Productivity Online Suite (BPOS), its Live@Edu offering and its Office Live Small Business service. That is what its Office 365 announcement was all about. (More nitty-gritty Office 365 pricing and licensing details can be found here.)

The Office 365 announcement was not about creating a new version of Office that will be hosted in/on/via the cloud (contrary to a number of headlines/reports you may have read claiming this).

Microsoft Office did figure into the Office 365 announcement in a couple of ways. Microsoft announced that for customers who want to buy the Office Professional Plus version of Office -- which runs locally on PCs, not in the cloud -- Microsoft will offer it to them on a subscription basis. That means users pay a monthly fee for Office, instead of paying for it all at once, up front.

(As one of my readers reminded me today, Microsoft volume licensees already can get this same Office Pro Plus SKU, though individual who buy at retail cannot. The Pro Plus SKU is the full Office family of products  -- Word, Excel, PowerPoint, OneNote, SharePoint Workspace, Outlook, Publisher, Access, InfoPath and the Lync communications client. Microsoft is not allowing Office 365 users to substitute a different Office SKU for it, officials told me yesterday)

In addition, because the new versions of BPOS -- the small business and enterprise Office 365 offerings -- will include SharePoint 2010 functionality, Microsoft will be able to offer Office 365 customers the versions of Office Web Apps that sync with SharePoint 2010. (Office Web Apps are not full Office; they are the Webified versions of Word, Excel, PowerPoint and OneNote that Microsoft rolled out last year.)

Yes, Microsoft's announcement yesterday had a lot of moving parts. But no, this was not some out-of-the-blue change in Microsoft's business model. Microsoft is still pushing Office first and foremost as a PC-based software package. And the Office 365 small-business and enterprise offerings (the update to BPOS) remain Microsoft's answer to Google Apps and other cloud-hosted business-app suites.

Speaking of Google Apps, it looks like New York City played its Google card in negotiating its latest software volume purchase with Microsoft. The New York Times says that the City got Microsoft to change the way it licensed them software and will end up saving $50 million over five years. It sounds from the details provided that New York got Microsoft to offer them a combination of Office Web Apps, possibly some BPOS and some on-premises software licenses mixed together.

This is definitely the way more and more of Microsoft's volume license deals are going to look in the not-so-distant future -- and Microsoft's licensing folks are already plotting what to do to capitalize on that mix.

One last Office 365 update: If you were among the many individual who were attempting to sign up for the limited beta yesterday to no avail, try again. A Microsoft spokesperson sent the following update, re: beta sign-in problems:

"The beta sign-up issues visitors we’re experiencing earlier yesterday happened when they were clicking 'submit' on the beta sign up form. The page was refreshing mistakenly. This should be fixed by now."

The beta is limited to 2,000 but signing up will get you a spot in line when Microsoft expands the Office 365 beta program.

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