For Microsoft, the 'cloud' is nothing new. Whilst Office 365 was officially launched to the market in October 2010, the tech giant has been releasing cloud products as far back as 2002, when it introduced its first hosted Exchange solution.
The growth of Office 365 in the home and small business markets is also undebatable – It has become Microsoft's fastest selling product ever.
However, although Microsoft keeps actual numbers well-guarded, it is widely accepted that 'Microsoft's cloud' has not yet taken the 670 million seat enterprise market by storm.
To recap, Microsoft's main cloud propositions are Office 365, which places its productivity applications including Office, SharePoint, Outlook, Exchange and Lync into the cloud; and it's complementary Infrastructure-as-a-Service, Azure platform. Office 365 allows a user to access Microsoft's familiar applications, on up to any of their 5 devices per license, so they can view their information from anywhere with an internet connection, 365 days a year.
For Microsoft, the cloud is clearly its priority. It has put billions of dollars' worth of investment into the product and market development of its cloud services; building large-scale data centres across the world, running major advertising campaigns and pursuing commercial deals such as the acquisition of Yammer in 2012 for $1.2 billion and its latest partnership with Dropbox in November 2014. It has also started to incentivise the switch to cloud amongst its customers. Since January 2013, Microsoft has released over 100 new-feature updates in Office 365. Many of these are cloud-first and then rolled into Service Packs later, but some are only available on Office 365.
The reason for this focus is Office 365 allows Microsoft to develop markets such as the consumer and small business markets, and transition bigger customers over to a much more attractive subscription-based revenue model. Traditionally in enterprise, Microsoft has relied on income from license upgrades of on-premise products when the next version is released. However, what has happened in recent years is that many organisations have avoided these version upgrades, sticking with fairly stable versions (e.g. Windows Server 2003, Exchange 2007 & Office 2007). Microsoft has often struggled to convince firms of the commercial value in upgrading so Office 365 presents Microsoft with an attractive and guaranteed source of recurring revenue.
So the factors above have fuelled Microsoft's drive into the cloud, but it is also these that have played a part in the slower take-up of Office 365 in enterprise. Despite Microsoft's attempts, organisations simply haven't wanted to upgrade. On Microsoft's website, it's hard to find case studies of Office 365 deployments in the enterprise market. There's a 2013 case study on British Airways, but that was technically a Yammer deployment rather than a replacement of core applications such as Exchange.
However, on entering 2015 there does appear to be a mind-shift amongst businesses. Firstly, these on-premises versions, however stable, are starting to age, forcing organisations to look at their options. For example, the end of support deadline for Windows Server 2003, 14th July 2015 will mean businesses operating on this platform are exposed to increased risks. Secondly, businesses of all sizes are accepting they need to look at a cloud strategy as a way to unlock efficiency and cost benefits in the IT department, and productivity and mobility benefits for end-users.
And if it's going to be anyone's cloud – Microsoft's should be a safe bet. Data security is a key concern for any business hosting systems in the cloud, and there is currently a lot of press as to whether all Office 365 data is subject to scrutiny under the Patriot Act, wherever it's stored, simply because Microsoft is a US company. Nevertheless, Microsoft's Q1 revenues of 2015 are forecasted to beat estimates, the company attributing this to strong growth in business cloud and mobility (i.e. Office 365 business subscriptions, its Azure cloud platform, and Dynamics CRM in the cloud).
The results suggest a growing recognition amongst businesses that Microsoft's cloud offerings have matured and there is increasing awareness and acceptance that it presents a good proposition. Besides the users' access benefits, IT challenges around data storage, back-up, redundancy, software updates and security can be outsourced out of the enterprise's IT department over to Microsoft to handle and costs can be more predictable, scalable and hopefully lower. For instance, the UK Parliament announced Office 365 is to become the default option for email, file-sharing, hosted apps and storage services for PMs and parliamentary staff by May 2015, predicting cost savings of £2.5million by 2020 for the UK tax payer.
Of course, the key sticking point remains the migration process. Enterprise migrations are always complex. They inevitably involve working with large amounts of data, considering many interdependencies and allowing for co-existence during the transition.They generally require substantial planning, lengthy migration periods, pilots, testing and out-of-hours timetabling for roll-outs. Many enterprises won't retain the specialist technical knowledge in-house so when it comes to the migration project so they also need to ensure whether they have the right skilled resource in place.
Migrating large scale systems such as email to the cloud also adds a layer of complexity in that speed of access and reliability of Internet connectivity become more important. Rather than accessing the company's servers, users are accessing Microsoft's data centres, so their experience must not be affected despite this change. As with other technology migrations, enterprises need Office 365 experts to help them configure their network, understanding latency and co-existence considerations. With companies who are spread across national and international geographies, there are further complexities involved in mapping where data will be stored for the most effective access and working with Microsoft to configure this.
Enterprises also have to decide how they will migrate to the cloud. This could include moving to a hybrid model and co-existing with both on-premises and cloud instances for several months until an organisation is ready to make the full cloud switch. Then there's the training element of ensuring successful adoption amongst users.
In September 2014, Microsoft announced it would offer new Office 365 customers who buy at least 150 seats of the online apps suite budget to invest in additional deployment assistance at no additional charge – a gesture seen as an acknowledgement that Software-as-a-Service (SaaS) applications aren't so easy to deploy in the enterprise market.
In fact, migrating to Office 365 is a major undertaking in the enterprise. It requires specialist expertise and sound project planning and delivery skills. However, against the current backdrop, now might be the time to really consider the move. And the good thing is, with this particular migration, you should only need to do it once!