Microsoft launches Office 365, glosses over cloud limitations

Microsoft Office 365 exits beta, available worldwide

CEO Steve Ballmer pitched his answer to Google Apps Tuesday as Microsoft announced worldwide availability of Office 365, but made no mention of Microsoft’s biggest cloud rival.

Microsoft CEO Steve Ballmer pitched his answer to Google Apps Tuesday as Microsoft announced worldwide availability of Office 365, but made no mention of the company’s biggest cloud rival or any of the limitations in cloud computing generally or Microsoft products specifically.

Office 365 will likely attract a big audience, since a huge number of businesses use Microsoft products already. But the Office 365 beta, which is now over, engendered some customer complaints, and Microsoft has deliberately held some functionality back from its cloud service to avoid cannibalizing software license sales.

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Some beta testers complained about limitations in importing contacts for shared global address lists, and the requirement to use the complicated PowerShell to perform tasks they felt should be simple.

At a fancy event in New York City, Ballmer spoke to media, analysts and customers, revealing little that wasn’t known already but providing a look at potential use cases for Office 365. The cloud service wraps together many pieces of software: Exchange, SharePoint, Lync, and of course, Office, in both on-premises and Web-based versions.

While few would argue that the rival Google Apps offers more functionality than on-premises Microsoft Office software, Microsoft’s online versions of Word, Excel, PowerPoint and OneNote are limited compared to Microsoft’s packaged tools and perhaps even compared to Google’s cloud offering.

Office Web Apps does a better job importing Microsoft Office documents than Google Docs does, but it lacks the auto-save functionality of Google Docs. Additionally, the ability to let multiple users edit documents simultaneously, provided in the browser by Google, is not offered with Microsoft’s Web-based versions of Word and PowerPoint. The rich clients of Word and PowerPoint are required for co-editing, even though Microsoft does provide browser-based co-editing in Excel and OneNote.

“Office Web Apps is purposely lightweight and is designed so that it will not cannibalize Office Pro revenue,” Gartner analyst Matt Cain says in an email interview. “If Google makes further inroads, Microsoft will clearly beef up Office Web Apps to be more competitive with [Google] Apps. The last thing that Microsoft wants to see is a diminishment in the Office franchise, and Office Web Apps is the instrument Microsoft can tune to combat Google Apps.”

Office 365 is available at a variety of price points, starting at $2 per user per month for just basic email, moving up to $6 for a small business package and up to $27 per user per month for an enterprise option that includes all the online offerings plus the non-cloud Office Professional Plus. Microsoft also said 20 service providers worldwide are bringing Office 365 services to customers this year, through a program that lets Microsoft partners sell Microsoft products with extra bells and whistles of their own design.

Ballmer on Tuesday primarily talked about the benefits to small businesses. Analyst Paul Burns of Neovise, who has been testing the Office 365 small business plan in beta, has previously said he doesn’t believe the service is ready to ditch the beta tag and enter general availability.

In updated comments this week, Burns said he hasn’t hit any outages or disruptions in the past few weeks, but “other limitations still appear to be in place. For instance, if I want to add ‘external contacts’ to be shared among Office 365 users, I still have to do it manually. This involves typing in first name, last name, display name, alias and email address for every contact I want to add.  That is a huge time sink since I have a few hundred I'd like to add.”

Using your own domain name for Office 365 email can also be a pain due to instructions that “are confusing and cannot be followed in sequence,” Burns says.

Microsoft didn’t address any of the limitations in Office 365 during public remarks, but both Burns and Cain give the service a fighting chance.

“Office 365 definitely puts Microsoft in the game versus Google Apps and [IBM’s] Lotus Live,” Burns said.

Cain, meanwhile, notes that “Just about everybody is a Microsoft Office customer, and many are Exchange shops.” It’s possible non-Microsoft customers will gravitate to 365, but Cain says the service “is appealing first and foremost to [current] Microsoft customers.”

Forrester analyst Christopher Voce, meanwhile, wrote a blog post saying Office 365 is “one of Microsoft’s most important products in the company’s history,” and that its success will be “driven by the strength of Microsoft’s broader platforms as well as the large partner ecosystem.”

Google Apps is priced at $50 per user per year, and has more than 3 million businesses signed up. But Microsoft claims there are 750 million active users of Office, and 100,000 or so customers have tried out the 365 beta.

Ballmer and colleagues showed some real-world examples of customers using Office 365 to become more efficient. A company called Wise Group is apparently getting rid of 60 servers and saving 30% on travel costs with the help of Microsoft’s cloud service.

Microsoft also showed demos of how the company’s cloud services help business teams collaborate, and how Microsoft software products such as Outlook and Word integrate with the browser-based services. One feature that may be compelling to small businesses is the ability to create and edit websites in the same way one edits Word documents.

“With Office 365 people can stay connected using instant messaging,” Ballmer said. “They can conduct real-time virtual meetings with co-workers, customers and partners whether they’re around the corner, in the same room or around the globe... Collaboration is absolutely critical to business growth. That’s why we believe the best collaboration technology has to be available to all businesses.”

Follow Jon Brodkin on Twitter.

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