June 28, 2011 / 12:50 AM / 9 years ago

Microsoft rolls out Office in the cloud

SEATTLE (Reuters) - Microsoft Corp made its biggest move into the mobile, Internet-accessible world of “cloud” computing on Tuesday, taking the wraps off a revamped online version of its hugely profitable Office software suite.

Microsoft CEO Steve Ballmer speaks at the launch of the company's Microsoft 365 cloud service in New York, June 28, 2011. REUTERS/Ray Stubblebine

The world’s largest software company is heaving its two-decade old set of applications — including Outlook email, Excel spreadsheets and SharePoint collaboration tools — into an online format so that customers can use them on a variety of devices from wherever they can get an Internet connection.

It wants to push back against Google Inc, which has stolen a small but worrying percentage of corporate customers with Google Apps — a cheaper, Web-only alternative that removes the need for companies to spend time on installing software or managing servers.

Chief Executive Steve Ballmer presented the overhauled and updated set of offerings — collectively called Office 365 — at an event in New York City on Tuesday morning, stressing that online versions and built-in conferencing tools can save users money, especially small and medium-sized businesses.

The full launch of Office 365, which has been in beta testing since last autumn, spices up the lively competition with Google for new users.

“While Office 365 does put Microsoft in mortal combat with Google, it is not really an existential threat for Google since Microsoft is essentially validating the model that Google pioneered with Google Apps,” said Matt Cain, an analyst at tech research firm Gartner. “I would expect that Office 365 actually heightens interest in Google Apps.”

Microsoft shares were up 2.4 percent on Tuesday afternoon, following a 3.7 percent jump the day before, partly buoyed by hopes that the company can ultimately boost profits by extending its software dominance to the growing cloud sector.

Microsoft has offered online versions of some Office programs — chiefly Outlook email — for its corporate customers for several years, and last year rolled out free versions for individual home users.

“The biggest thing I like about it is that it takes the need to manage servers away and puts it in someone else’s hands,” said Kevin Lisota, CEO of Seattle real estate startup Findwell, which has five employees and has been using the test version of the product.

“It takes our email and team Internet sites and basically makes that Microsoft’s problem so I don’t have to worry about that,” said Lisota, who was invited by Microsoft to an Office 365 launch event at its headquarters near Seattle.


The market for Web-based software services is heating up, and every company, government department and local authority is getting pitches from Microsoft and Google whenever they re-evaluate their office software.

It is a new challenge for Microsoft, which built itself up on expensive versions of software installed on individual computers. That business model turned the Office unit into Microsoft’s most profitable, earning more than $3 billion alone last quarter.

Microsoft’s plan is to make up for smaller profit margins from Web-based applications — due to the cost of handling data and keeping up servers — by grabbing a larger slice of companies’ overall technology spending.

Microsoft said it will charge from $2 per user per month for basic email services to $27 per user per month for advanced offerings, with a standard, small business package priced at $6 per user per month. Google charges a flat fee of $50 per user per year for its Web-based Google Apps product, which offers email, calendars, word processing and more online.

Microsoft, like Google, will host users’ data remotely, and maintain all the servers in vast data centers. Unlike Google, it will also allow companies to put their data on dedicated servers should they choose, or keep the data on their own premises.

Google, which has had the most success in the small and medium-sized business range, says there are now 40 million users of online Google Apps suite. Microsoft does not publish equivalent numbers, but research firm comScore has estimated 750 million people worldwide use Office in some form.

But Internet-centric Google — whose success is based on its dominance in Web search — is confident it has the upper hand in the cloud.

“Compared to what they (Microsoft) have in the market today, they have nowhere to go but up,” said Dave Girouard, head of Google’s worldwide enterprise business, in an interview last week. “We feel we’re years ahead of them in terms of building a viable cloud solution that just works.”

Reporting by Bill Rigby, editing by Gerald E. McCormick and Matthew Lewis

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