Microsoft says its Web-based software won't cannibalize its traditional applications
MICROSOFT NOW HAS Exchange Online and SharePoint Online, Webbased versions of its productivity and collaboration software applications, providing two more logs with which to stoke the fire in its fight with Google.
Officially launched Nov. 17, Exchange Online and SharePoint Online represent an attempt to take share from Google Apps in the increasingly turbulent market for SAAS (software as a service), or cloud computing.
Google Apps, including Gmail and Docs word processing, presentation and spreadsheet programs, was created as an alternative to Microsoft's Exchange and SharePoint.
For Microsoft, the question now is whether Exchange Online and SharePoint Online might similarly take share from Microsoft's classic packages, which users download locally to PCs and servers. Will Microsoffs SAAS solutions cannibalize the sales of its on-premises applications?
Not at all, said Chris Capossela, senior vice president for Microsoft's Information Worker division. Capossela said two-thirds of existing Exchange Online and SharePoint Online customers - as well as those currently in the pipeline - are coming from on-premises suites such as IBM Lotus Notes and Novell Group Wise.
"We see this as an expansion of customers we are able to serve with Exchange and SharePoint, not a migration of existing customers," Capossela said. "We can now reach people more easily, and they don't need an IT person to run their messaging."
Google's enterprise team probably used the same argument to promote Google Apps over Exchange and SharePoint. Surprisingly, Capossela didn't claim Microsoft was taking share from Google. He said he expects that to change because Microsoft is offering more flexible pricing than Google, which has a one-size-fitsall pricing scheme.
Analysts who follow the space closely differed over whether Microsoft would eat up some of its own Exchange and SharePoint share.
Josh Greenbaum, an analyst with Enterprise Applications Consulting, said Capossela may have not mentioned Google because he knows Google is already taking share from Microsoft's classic on-premises business.
Greenbaum applauded Microsoft's Online Services move.
"In a certain sense, this is a smart strategy for Microsoft to recapture some potential lost revenue and keep it in-house," he said. "It has the potential to be less remunerative in the short run, but if s better than losing seats to the competition."
Sara Radicati, an analyst with the Radicati Group, had a different take. She said that while Google Apps' pricing is attractive, there is a segment of the customer base looking for the same Exchange and SharePoint functionality they have today, but at a lower cost of operation.
At $2 to $15 per user, per month for Exchange or SharePoint - or both - Radicati said Microsoft's Online Services are attractive.
"I don't think Microsoft is so much cannibalizing sales of its own on-premises software," she said. "Rather, I think the hosted option is essential for them to hold onto SMB [small and midsize business] customers that would be migrating to a hosted - or nonhosted - lower-cost option anyway. Basically, these are customers they would have lost anyway from their on-premises software offerings, so this way they have a way of retaining them."
Forrester Research analyst Chris Voce agreed, noting that even if a customer stops paying software assurance on Microsoffs on-premises licenses and moves to Microsoffs Online Services, the vendor would still be in a nice "ongoing billable relationship" that keeps customers at Microsoft.
Capossela clung to what has been Microsoft's mantra the last few years: software plus services. More choice, he said, is the winning proposition.
"Everyone knows the future lies in leveraging the best of cloud and onpremises software," he said. "The vast majority of customers will live in a hybrid world, where they will mix and match software plus services. What we have is very different from Google or anybody else in the market."
Exchange Online and SharePoint Online have been offered to companies with fewer than 5,000 seats for about nine months. Now they are available to U.S. businesses of all sizes.
The SAAS versions of Microsoft's popular productivity and collaboration suites are something that most industry observers have been expecting for several months to augment the Microsoft Online Services portfolio.
They also come three weeks after the software vendor introduced "Azure," which now is in a technical preview. Azure is Microsoft's push for Windows as a cloud computing solution, enabling users to buy the same Windows applications via the Internet as a service rather than downloading them to their PCs and servers.
The Azure platform will complement the online services push Microsoft is making.
[Sidebar]
'Everyone knows the future lies in leveraging the best of cloud and on-premises software.'
-CHRIS CAPOSSELA
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