Can Office 365 Help Microsoft's Relevance in the Cloud?

In Apple’s 2005 era “Mac vs. PC” advertising campaign, the company worked to attribute Microsoft’s Windows operating system as dated and boring by associating it with spreadsheets, number crunching,mail-merges, and just about everything that consumer computer users deem as “boring.”  And even though Mac OS X is indeed a great operating system for business use, I cannot deny the fact that Apple had a point.  Microsoft has always been known for their flagship office suite, appropriately marketed as “Microsoft Office.”  When you combine this with enterprise-level collaboration and communications solutions such as Microsoft Sharepoint and Microsoft Exchange, Microsoft has historically had a leading edge in this field.

But even with this advantage, Microsoft has more recently found themselves against a growing roadblock that has figuratively dulled their edge on the business communications and collaborations market which they previously dominated.  With the development of cloud-based alternatives to both Exchange, Sharepoint, and even the Microsoft Office suite, new solutions have become much more attractive alternatives to Microsoft’s array of products.  Google Apps, for example, gives businesses small and large access to a full suite of cost-effective and proven information technology systems.  One of the biggest selling points for these services has been the fact that they operate entirely on third-party platforms, meaning that businesses and companies have the flexibility to run fully featured business communications systems without the cost or headache of traditional IT overhead.

Yesterday, however, Microsoft announced a new cloud-based platform – quite obviously aimed at competing with Google Apps – dubbed “Microsoft Office 365” which provides an entirely cloud-based collaboration and productivity suite to an entirely new market.  Offering businesses the ability to take advantage of the proven Exchange and Sharepoint technologies, Microsoft may have hit a home run by making services that had previously been more or less exclusive to larger enterprise environments available for small and medium-sized businesses.

With pricing starting at six dollars per user per month, Office 365 is a very cost-effective solution.  In fact, for less than what one would normally pay a third-party company to host a simple Exchange mailbox, businesses not only have the opportunity to utilize Exchange/Sharepoint services, but are also able to easily maintain business websites and integrates seamlessly into the existing Microsoft Office desktop suite.

Now, it’s important to realize that even though this is a very competitively priced product, it likely won’t go further than medium-sized organizations.  This is simply because larger businesses have the resources to maintain in-house solutions, and in many cases prefer to do so simply because of the flexibility and control that they attain from doing so.  But for smaller businesses in every industry, Microsoft’s new service-based product looks very promising.

At $6 per month, Office 365 comes out $22 per user per year more than the premier version of Google Apps.  However, I honestly think that Microsoft will be able to get away with this higher price because of the fact that their products have already been proven in large-scale environments, whereas Google has had to compete a bit to get users to consider their suite which many perceive as “different” and outside of traditional logic.

In all honesty, this is the first time in a long time that I have been anxious – and exited – to see a Microsoft product get off the ground.  This is the type of venture that I think will allow Microsoft to regain previously lost traction in the cloud computing arena, and even though I think Google will ultimately prevail overall I personally believe that Microsoft has a place in cloud products designed for small businesses.