Mass retailers and solution providers who sell packaged versions of Microsoft’s Office software to small medium business are facing a downturn in sales as Microsoft and Telstra team up to launch Office 365, a mobile, Internet-accessible cloud computing version of its hugely profitable Office software suite.
The business customers of retailers like Officeworks and Harvey Norman are being targeted as Microsoft and Telstra go head to head with Google Docs in a battle to shift consumers from packaged Microsoft software to a $12 a month cloud services offering.
The move to strip business from retailers comes on top of an exodus of customers to Internet shopping from both overseas web sites and the likes of giant US retailer Staples who are now selling office products online in Australia.
The software giant is offering an alternative to its two-decade-old set of desktop-shackled applications such as Outlook e-mail, Excel spreadsheets and SharePoint collaboration, replacing them with an online format so that customers can use them from when and wherever they can get an Internet connection.
The move by Microsoft is squarely targeting Google, which has captured a number of Microsoft’s corporate customers with cheaper, Web-only alternatives such as Google Apps and Docs. Google claims 3 million corporations and other organisations are now customers of the Apps business software.
If Microsoft can execute the launch effectively, Office 365 could be a “game changer,” said Michael Yoshikami, CEO of US money manager YCMnet. But he added: “Whether or not that will happen is a whole other story.”
CEO Steve Ballmer is set to present the new Office 365 at an event in New York city on Wednesday morning, US time, outlining the company’s newfound online focus.
In Australia, Microsoft will be launching the product in Sydney this morning at a joint event with Telstra. But some customers have jumped the gun: WA’s Curtin University is already reported to be rolling out Office 365 to 10,000 staff.
The move reflects a booming market for cloud software services. Every company, government department and local authority is getting pitches from Microsoft and Google to take a bite from their software pie.
Microsoft built itself on expensive versions of software installed on individual computers. That business model turned the Office unit into Microsoft’s most profitable, earning more than US$3 billion alone last quarter.
Microsoft is now pinning its hopes of taking smaller profit margins from Web-based applications, but actually grabbing a larger slice of companies’ overall technology spending.
Australian pricing will be revealed today.
In North America, the software is expected to cost small businesses US$6 a user each month for a package comprising Office Web Apps, Exchange Online, Sharepoint Online, Lync Online, and an external Web site.
For an additional $12 a month, companies subscribe top the “enterprise edition” which includes Office Professional Plus desktop software, Web conferencing and other high-end tools.
Google charges a flat fee of $50 per user per year for its Web-based Apps product, which offers e-mail, calendars, word processing and more.
Microsoft plans to host users’ data in vast data centres but it will also allow companies to put their data on dedicated servers if they choose, or even keep the data on their own premises. Google currently does not.
Microsoft shares rose 3.7 percent on Monday in the largest gain in a single trading day since September. ahead of today’s announcements. – Kate Castellari and wire services
