Microsoft claims 40 million cloud customers, but few adopt Exchange Online
Tech companies love to play games with numbers – especially when they don’t want to admit that a product isn’t being adopted by as many customers as they’d like.
That’s an essential truth to keep in mind when trying to figure out how many people actually use the cloud e-mail services offered by Microsoft and Google.
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We recently learned – from Gartner – that Google’s Gmail has less than 1% of the enterprise e-mail market, despite Google’s boast that “more than three million businesses run Google Apps.”
That news was music to Microsoft’s ears – but Microsoft doesn’t shy away from numbers games itself.
Earlier this week, I interviewed Microsoft’s Betsy Frost Webb, general manager of the company’s Online Services business. The occasion of the interview was to discuss Microsoft’s announcement that it is achieving “customer momentum” for BPOS – the Business Productivity Online Suite – which includes the hosted versions of Exchange and SharePoint.
Naturally enough, I wanted to know how many customers use BPOS. But since this is the tech industry, Microsoft’s announcement of “customer momentum” for BPOS doesn’t actually include the number of businesses and people that use BPOS.
“BPOS has grown three-fold this year alone,” Webb notes, while saying that there are 40 million paid seats of Microsoft Online Services.
But Microsoft Online Services includes a lot more than BPOS. Microsoft Online Services includes more than a dozen products, including Dynamics CRM Online, the Windows Intune Beta and Windows Azure. Even BPOS includes more than Exchange and SharePoint. Office LiveMeeting and Office Communications Online are part of the Business Productivity Online Suite.
Thus, the 40 million paid seats figure isn’t particularly helpful when you’re trying to figure out how many businesses use Microsoft’s cloud-based email service. Certainly, Microsoft is far and away the market share leader in business e-mail, but to properly gauge the momentum of Google we also need to compare Gmail’s business adoption to Microsoft’s cloud e-mail.
Microsoft surely knows how many people use BPOS and its cloud email services, but it’s not saying.
The 40 million paid seats figure includes some Exchange Online customers, but “We don’t break down the 40 million specifically across the workloads,” Webb says.
Luckily, there are analyst firms that track this sort of thing, so we don’t have to rely on the vendors to report their own customer adoption figures. I e-mailed Gartner analyst Matt Cain to see if Gartner has any figures on BPOS adoption, and he responded: “We’d roughly estimate that there are about 800,000 seats of BPOS multi-tenant, and 1.4 million seats of BPOS dedicated.”
That gives Microsoft 2.2 million BPOS seats, not much more than Google’s corporate email business, and possibly less when you consider that many BPOS customers could be using services other than e-mail. Gartner says there are between 1 million and 2 million end users on the paid version of Gmail.
Gartner’s estimate of 2.2 million Microsoft users includes all seats, regardless of company size, whereas the analyst firm’s estimate on Google only includes customers with 100 seats or more. If you add in all those 50-seat customers Google has attracted, then Gmail could very well be the most popular cloud-based email system.
If Microsoft really had 40 million cloud email users, you can bet they’d spell that out clearly in a press release.
But let’s not discount the e-mail users Microsoft does have, the ones who, by and large, run Exchange within their own data centers.
A Ferris Research study from 2008 credits Exchange with 65% market share across all organizations.
Given Microsoft’s overall dominance in email, you’d think the company would reveal exactly how many users of Exchange there are in order to account for the 65% market share. But even here, a Microsoft spokesperson tells me that “Microsoft doesn’t have a number of [Exchange] customers or deployed seats breakout available to share today.”
Microsoft will say that it has sold more than 100 million SharePoint licenses – although because of the way licenses are sold that doesn’t mean there are actually 100 million users.
Microsoft also has 20 million users of Office Web Apps, a free consumer service, and more than 11 million users of the free Live@edu service for universities, again not a fair comparison to the paid, business version of Gmail.
No matter how you slice it, Microsoft is the dominant player when it comes to providing email inboxes and related office software. But trying to figure out how many customers Microsoft actually has is a daunting task.
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UPDATE: In the original version of this post, I wrote that Microsoft’s Online Services Division pulled in $2.2 billion in revenue in fiscal 2010 while posting an operating loss of $2.4 billion. While this is still true, it turns out that there are two Online Services units at Microsoft, and the one referenced in Microsoft’s financial reports is the division that includes Bing, MSN and tools for advertisers and publishers.
BPOS and other cloud platforms, while also called “Microsoft Online Services,” are counted in financial reports as part of the “Microsoft Business Division,” which made a profit of $11.8 billion in fiscal 2010. The Microsoft Business Division revenue numbers include the non-cloud versions of Office, Exchange and SharePoint. Microsoft does not reveal the revenue and income of BPOS by itself.
