Currently, Microsoft’s main Office offering for small/midsize
businesses (SMBs) is Office 365. Yes, SMBs also can and do purchase local
versions of the Office client apps and their complementary server counterparts
(SharePoint, Exchange, and Lync). But Microsoft’s goal is to get as many of its
SMB customers as possible to move to a subscription-/cloud-based Office model.
And that means Office 365.

Before Microsoft
officially launched Office 365 in June 2011
, the company was selling
cloud-hosted versions of SharePoint, Exchange, and Lync in the form of a bundle
known as Business Productivity Online Services (BPOS). However, BPOS was more
of an enterprise-focused offering, in terms of its price and its target

It wasn’t until Microsoft began its rollout of Office 365
that it had a collection of cloud-hosted apps designed to go head-to-head with
Google Apps in the SMB space. Knowing this, it’s not too surprising that about 90
percent of the customers who’ve purchased Office 365
since launch have been SMBs, according to
Microsoft’s externally released figures. Microsoft does sell Office 365 to enterprise
users, too, but the majority of purchasers of the new cloud-server suite have
been SMBs.

So many Office 365 SKUs, so little time

Up until late 2012, Office 365 referred to a specific set of
cloud apps: SharePoint Online, Exchange Online, and Lync Online. Users could
buy these as a bundle or separately. They had the option to buy plans that
allowed them to install locally the full set of Office apps, as well.

There are a lot of Office 365 SKUs, with different offerings
positioned for differently sized organizations. These range from Office 365
Small Business to Office 365 Enterprise.

With the
launch of Office 365 Home Premium in January 2013
, Microsoft muddied the
Office 365 nomenclature waters. This new version didn’t include Exchange Online,
SharePoint Online, or Lync Online — the traditional Office 365 backbone apps.
Instead, Home Premium is a subscription/annuity version of Microsoft’s Office
client apps.

For $100 a year, Home Premium “renters” can
install the Office client apps on up to five PCs and/or Macs. As of June 2013,
they also can install
Office Mobile on their iPhones
as part of this price. If and when Office
365 Home Premium users decide not to renew their subscriptions, they’ll
have a grace period
during which they can save their documents/data. They
can then modify them using Microsoft’s free Office Web Apps, which have more
limited functionality.

While some company watchers had wondered whether consumers
would balk at going the subscription route with Office, Microsoft officials
announced that in the first 100 days that the Home Premium SKU was available, one
million people subscribed
. Company officials wouldn’t say how many
local/non-subscription copies of Office 2013 Microsoft sold during the same

Unlike the Office 365 Home Premium SKU, the other Office 365
SKUs all include access to Exchange Online, SharePoint Online, and Lync Online.
These more traditional Office 365 SKUs include, but are not limited to:

  • Office 365 Small Business
  • Office 365 Small Business Premium
  • Office 365 Mid-Size Business
  • Office 365 Enterprise (E1 and E3)
  • Office 365 Government

Microsoft recently made it easier for these SKUs to
be sold via select resellers/partners
and for partners to sell SKUs to
users, which allows them to upgrade to a more feature-rich version that
supports more individual clients.

The number and variability of Office 365 SKUs is a
double-edged sword. More SKUs means more customizability. But it also means
more complexity for resellers and customers — something Microsoft officials
have admitted could
put the company at a disadvantage
when selling against its rivals —
especially Google, with its Google Apps offering.

Office 365: The future

For the past year or so, Microsoft has been pushing regular
feature updates to its Office 365 SMB and enterprise/government users. While
the official word is that new features are delivered on a quarterly basis, the
team has actually delivered new updates nearly every month. Microsoft
maintains a Wiki
where it lists the new features it has rolled out.

The process of upgrading existing Office 365 users to the
latest foundational layer of Exchange Online, SharePoint Online, and Lync
Online features has been slow and laborious. According to the
latest update in the Office 365 Community Blog
, 90 percent of customers
have been upgraded or been told they would be upgraded in September. The rest
are promised an upgrade “in the next few months.” The current upgrade
will allow all Office 365 customers to use most of the features Microsoft
delivered to its on-premises Exchange, SharePoint, and Lync customers as of
October 2012.

Once this upgrade is complete, the Office 365 team will be
officially on the faster cadence path, along the lines of the ones on which
other teams at Microsoft are moving. As part of this new,
faster delivery model
, there will be no more Office 365 “upgrades”
(aka “big bang” releases that take multiple years to develop and
deploy). Instead, there will be regular, near-monthly updates.  SMBs and enterprise users who opt for Office
365 over the local/on-premises versions of Office client and server will get
all the latest features first.

There’s a chance Microsoft could someday deliver Office 365
updates even more frequently, similar to the
pace that Microsoft’s Yammer enterprise social-networking acquisition has
and is endeavoring to continue.

In the longer term, Microsoft is still invested in the idea
of hosting
Office 365 on top of Windows Azure
. Currently, Office 365 runs on Windows
Servers inside Microsoft data centers, but the underlying infrastructure isn’t
technically Windows Azure. Microsoft officials have been talking about this
plan for the past few years. The idea is that moving the Office service core
onto Azure will enable SharePoint Online, Exchange Online, and Lync Online to
be updated more rapidly by building on top of the same common set of underlying

While Microsoft officials still haven’t announced a date as
to when this might happen, there are individuals already working on it. But before
Office 365 is moved to Azure, the Office and Azure teams plan to deliver on a
handful of other integration points, many of which revolve around the Windows
Azure Active Directory’s single sign-on and federation authentication

Another future expectation is that Microsoft will make more
of its Office client applications available to Office 365 subscribers — not
just for use on Windows devices, but also on iOS and Android ones. There’s
still talk that Microsoft may be on the path toward delivering locally
installable Office clients for iPads and Android tablets
, but with an
Office 365 subscription requirement. These iPad/Android clients are expected to
come to market some time after Microsoft launches the “Gemini”
Metro-Style/Windows Store versions of Word, Excel, and PowerPoint (along with
an update to the already Metrofied OneNote), which could happen anytime between
late 2013 and early 2014

Office 365 resources

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If there’s a Microsoft product or service family you’d like
Mary Jo to examine in a future column, let her know and we’ll do our best to
cover it.