In June 2011, Microsoft took the big step of bringing one of its most successful software products, the Office suite, into the Cloud.
It was a bold move by the company, which has occasionally shown hesitation towards the Internet, preferring to following in the footsteps of the competition instead of being an early technology adopter. However, the launch of its online enabled Office 365 meant that Microsoft became a serious player in a rapidly growing, yet still niche, field.
Looking back at the launch of the Cloud-based suite, Ovum research director, Steve Hodgkinson, characterises the advent of Office 365 as a "necessary strategy" for Microsoft. "It needed to make a transition strategically towards Cloud-based service delivery," he said. "It's part of their strategic commitment to do that, so in that sense they had to start somewhere."
Microsoft Australia Office 365 lead, Isabel Boniface, is a new addition to the Microsoft family, having joined the company two years ago. However, Boniface came onboard at Microsoft in time for the high profile launch of Office 365 in Australia, which took place at Sydney's Telstra Experience Centre.
Following the product's release, Boniface said adoption by the local market "definitely exceeded" Microsoft's expectations. "It's on track to be one of the fastest growing business offers in our history," he said.
Whether Office 365 exceeded Microsoft's expectations or not, Hodgkinson said it is better to look at Office 365 in the context of the momentum behind the growth of Cloud services. "In that sense, it is a subset of a small, but fast growing market," he said. "Maybe expectations for it were higher than that, but the reality is that Cloud services are still a small subset of the market but on the rise, and Office 365 sits there."
Two years have passed since Microsoft launched Office 365 in Australia, leading to speculation to whether the product has managed to maintain the momentum it generated in the wake of its widely publicised release. Even with the passage of time, Boniface said there remains a strong interest in Office 365.
"Businesses large and small are looking to Cloud services not just to lower costs, but to enable new ways of supporting a distributed, mobile workforce to be productive and more effective," she said. When it comes to what types of customers are adopting the suite, Boniface said it ranges from SMBs like Calibre Real Estate to mid-market customers like V8 Supercars, all the way to larger enterprises such as Caltex.
In the past 12 months, Microsoft has reported a 150 per cent increase in SMB-sized businesses using Office 365. "One in five Microsoft enterprise business customers are now using Office 365, which is up from one in seven last year," Boniface said.
Hodgkinson said Office 365 is currently doing well in Australia and that Microsoft is "likely quite happy with the pace of adoption" of the product. "It has enabled Microsoft to secure a positioning in the market, which gives it a viable SaaS alternative to Google Apps," he said. By establishing itself, Hodgkinson expects the suite to keep going forward from its position. "Though, Microsoft is kind of hedging its bets [with Office 365] around the future of on-premise software products," he said.
The big number two
Cloud was one of the industry buzzwords when Office 365 launches in 2011. Boniface attributes this attention to the Cloud levelling the playing field while opening up opportunities for people to access "sophisticated productivity solutions who may not have had access before," particularly small businesses.
"While large enterprises have been using Office, SharePoint, Exchange and Lync together with great success, SMBs didn't have the ability to have access to the same enterprise grade solutions," Boniface said.
She explained enabling business productivity is "at the very core of Microsoft's DNA". For that reason, the potential of melding the Cloud with Office was apparent for the company, as well as its customers. "When we first released Office 365, our customers told us cost savings, less hardware investments upfront and less cost maintaining and managing the equipment over its lifecycle were key drivers to give them the freedom to focus on strategic investments," Boniface said.
With Office 365 reaching its second anniversary, she said the needs of customers have evolved in that time. For one, businesses are looking to reduce IT complexity and free up their IT departments to focus on strategic projects. They also want to enable people to be efficient and productive wherever they are. This includes accommodating the increasingly flexible nature of the workforces.
"This is driving growth in Cloud-based productivity solutions, but we're still in the early stages of broad adoption," Boniface said.
Boniface highlights the bring your own device (BYOD) trend as another market driver that has sprung up in last two year. "The line between the tools we use for work and home has blurred as personal technology enters the workplace, which is having a profound impact on the modern workplace," she said.
Then there are the multiple generations of employees working side-by-side, which in turn require the businesses to accommodate varying preferences and levels of technical sophistication.
However, in spite of all this, Boniface said companies had to deal with the responsibility of maintaining compliance, security, and reliability. This happens concurrently with making the most of their technology investments.
"In response to these dynamics, organisations are adopting tools like Office 365 to make teams more productive and accelerate innovation to improve competitiveness," Boniface said.
A rush of blood to the head
When it came to the launch of Office 365 for the Australian market, the key differentiator was Telstra's involvement with the rollout of the product. In this case, Telstra's T-Suite had an exclusive role in the distribution chain for the software. Microsoft's partnership with Telstra is now reaching its forth year, and Boniface said it led to a successful rollout of the Cloud-based product.
"The great strength in the partnership is that together we bring together world class products and services on a world class network to help Australian businesses increase productivity," she said. "It was a compelling proposition at launch and it remains a compelling proposition today."
T-suite's exclusivity with Office 365 caused some industry pundits to question the move at the time, particular when it came to the channel. Hodgkinson's position is that these types of closed deals are "not necessarily the right way to go," at least from a marketing perspective. "It is better to keep all of the options open," he said.
However, Hodgkinson admits that Telstra has been reporting strong growth of services in T-suite. This growth is often attributed to Office 365 adoption through T-suite. "In that sense, the exclusivity seems to be working for some sections of the market," he said.
Hodgkinson is referring to markets where Telstra has a strong "business services type of footprint" through its various business centres and distribution channels.
By partnering with Telstra, Boniface said the aim was to pass on the benefits to Australian SMBs. "Our alliance means that they have access to products and services that were formerly only available to large companies with well-resourced IT budgets and infrastructure," she said.
"Many of Australia's small and medium businesses turn to Telstra for their communication needs, so there are natural synergies for Microsoft and our partner community to offer additional value through Office 365 with Telstra."
Another issue that was voiced around the Office 365 launch window was the higher prices in Australia compared to the US, with the topic of IT pricing evolving in recent months into a full blown parliamentary inquiry that has involved several vendors.
Hodgkinson explains that the increased prices in Australia are primarily due to the T-suite partnership. "Telstra is offering a certain degree of local support, so there is a local value-add," he said.
Due to that, Hodgkinson said it not fair to compare the Australian package to what can be accessed over the Internet from the US. However, he is unable to speculate whether that cost difference is justified in the actual support offered by Telstra.
"T-suite in Office 365 is primarily targeting an SMB audience, one that is not going to have a rush of blood to the head and suddenly buy it online," he said. Since a "degree of handholding" and support is necessary, T-suite is suited for that purpose.
"So Microsoft Australia's pricing is in line with the way their market operates in, with customers more willing to pay more for better support and assisted implementation," Hodgkinson said