UCStrategies Experts Discuss Microsoft Office 365

Transcript for UCStrategies Experts Discuss Microsoft Office 365

Marty Parker: Hello. This is Marty Parker with ucstrategies.com and I’m here with the UCStrategies expert team and today we’re going to discuss the topic of cloud-based Unified Communications solutions. We continue to see growth in this category as cloud-based capabilities are enabled by bandwidth processor capabilities and software capabilities. We see this appearing in core telephony, in messaging and most recently we see it appearing with Microsoft’s announcement of Office 365, their cloud-based and hosted version of the Office Suite. So today we’re going to talk primarily about the Office 365 announcement; in a follow on call we will talk about the hosted core telephony environments and in a future call we will talk about managing with the cloud, how you integrate cloud services into your existing infrastructure, because it’s not going to change in an instant overnight, you’ll need to bring the two environments together. That will be a separate conversation as well. So, a program of three things, starting today, with the discussion of Microsoft Office 365 and its implications for cloud-based applications in the market. We’re going to begin by calling on David Yedwab, who will describe what’s in the Office 365 Suite. David.

David Yedwab: Thank you Marty and all, this is sort of rather interesting in that Microsoft has repositioned its current hosted offering BPOS, Business Process and Online Services, and added Office, SharePoint, Lync in a limited degree, as well as conferencing and capabilities to a hosted offering being hosted by Microsoft and being sold either directly by Microsoft or through its partners. To date, all they told us around when the service is going to be available is some time in 2011.

BPOS has been in operation for well over a year and they claim having over 6,000 of their partners certified to sell the online suite, and just announced changes to the partner compensation for the first time to Microsoft’s partner compensation plan. They’ve added a volume space into their compensation plan, so that partners that have more customers assigned as well as higher numbers of users will get a larger share of commission than those providing smaller solutions.

In the launch of Office 365, Lync is included, their UC-C service, but voice is only included from a conferencing and collaboration perspective, not PSTN voice at this time. And the key phrase there is “not at this time.” We don’t know when voice will be added, but we assume it will be in the future. Interestingly at the Microsoft Worldwide Partner Conference this past July, they had several of their hosting partners talking about their offers and several of them are already providing a hosted voice capability in addition to hosted exchange, which is also a major portion of Office 365, using other platforms other than the Lync platform. So it’s going to be interesting to see how all of that plays out and certainly the impacts and changes on the industry from a major player like Microsoft becoming a major hoster and as they said again back in July, they’re “all in” for the cloud. And now let me now turn it over to Lisa for further discussion about cloud.

Lisa Pierce: Thanks David. When we think about cloud, it’s kind of hard to think about it, because it’s so amorphous, but let me just say a few things in this context. Number one, David already brought out the point that this announcement by Microsoft does not include basic voice connectivity; it only includes functions that require essentially multiport type environments, to think of it simply. The vast majority of your calls, of course, are typically fairly simple right now although UC will bring in, of course, an added level of complexity and richness. But you can’t have one without the other, so the question is, for those of you who want to implement this solution as soon as possible, how do you make it all work together? We don’t have, unfortunately, any information to provide you with insight right now, but this is certainly to press Microsoft about in the near term, or Microsoft key partners, for instance, in the SIP signaling space like some of the major carriers.

The other things to think about are when we talk about conferencing we are talking about sound conferencing functions today, not all of them. For instance, video conferencing, as a simple example, is something that many of you are going to be using more of in the days going forward, and thus you want think about integrating it with Microsoft functions very carefully.

Finally, when we think about cloud and hosted, we can think about functions like UC or other types of functions that have only a limited relationship to real time functions today. For instance, the most two commonly requested cloud functions today are storage and servers, so basic types of IT hosting. When your company is looking at the question of cloud, it needs to have a strategy across the domains of IT, because if you begin to think about this as, forgive me, application specific, you’re going to be managing a whole mess of providers and that’s going to get very complicated—a subject for later UCStrategies discussion.

Russell Bennett: This is Russell Bennett. Obviously having worked on this fairly recently I have to be very careful what I say and make sure I’m not letting anything out that I shouldn’t. The whole thing about Office 365, as the marketing messages say, it’s about big company collaboration capabilities for the smaller company and integration working together the way it’s intended, which is a polite way of saying that this technology is slightly complicated and does take a lot of IT expertise to get it rolled out and deployed and integrated together, so Microsoft’s going to do it for you.

An interesting aspect of the current beta launch is a commitment to a 99.9 percent uptime guarantee with money back if they fail to live up to that service level agreement. The other savvy thing about this is that Microsoft is using its existing Office franchise to bridge the gap between the technology and feature functionality that people are very well used to in the work place today though to UC and therefore actually crossing the UC chasm. And I’m just going to address the generational issue that often people speak about when they talk about UC that young people are used to using online communications and older people aren’t. Well, everybody I suspect below the  age of sixty and maybe even higher is very familiar with Office and they’ll be drawn into using UC.

Another key thing here is the economic disruption.  The price on the beta program is $6 per user per month, and that is shockingly low. I, like many other people, are paying 30 or $40 a month for voice over IP from my cable provider or telephony provider, and $6 a month for all the collaboration capabilities with voice to follow and video to follow later on is not only going to disrupt everybody else, it’s actually going to disrupt Microsoft, of course, because typically they’ve been selling the Office Suite for 200 to $450 depending on which level of functionality you bought. And what they’re betting is that $6 per user per month is a better and more predictable and more sustainable revenue stream than hoping that somebody’s going to go out and buy Office 2012 or 2015.

Another key issue is net neutrality. If Microsoft is going to be competing with all these different incumbents in the communications space, then how are they going to deal with the issue of those incumbents also being the ones in many cases carry the IP traffic and can we expect the regulatory bodies to actually enforce net neutrality? There are a lot of competitive and marketing issues involved in this, it’s a real interesting subject. I think we’re going to need to cover this more in another call.

Marty Parker: Thanks Russell, for that insightful comment and to David and to Lisa as well. Who else would like to add to this conversation?

Dave Michels: This is Dave Michels. I’ve got a couple thoughts about this. For one, I’ve been using Google Apps quite a bit and it’s interesting, because Google Apps, the office suite that comes in Google Apps, is certainly being positioned for the first time as an Office alternative, but it’s never had the rich functionality of Word; I mean, I don’t think you can even do page numbers or some real basic stuff that Word can do, but as Google says, it meets most people’s needs. It’s interesting because I think obviously Google Apps has become a competitive threat and there’s a lot of companies that have gone Google and this is a definite response to that. It’s interesting to me, because Google’s been working so hard to get parity or as an alternative to Microsoft and then when Microsoft changes the game like this it really changes the whole question. If I can use Office for about the same price, then Google becomes much less attractive.

The one thing that differs is that Google, of course, offers real-time collaboration and Microsoft doesn’t offer that yet. They’re going to be integrating into SharePoint which is still one user at-a-time collaboration. And so I think Google’s got a pretty big advantage around collaboration, but certainly nowhere near the functionality set. Also Google’s got an interesting pricing concept where if you’re a business user with less than 25 users, it’s effectively free, and Microsoft hasn't matched that. They’re offering pretty low pricing, they’re not offering free pricing for that small business. I think they’re planning a free pricing for individuals.

Lots of channel questions coming up with Office 365. One thing that Microsoft will be doing is billing end users directly. There’s a possibility they’ll be putting the channel partner’s name on the invoices, but this is making a lot of channel partners fairly uneasy about this.

Also the disruption of profit for Microsoft is also a big disruption for the profit of the channel, selling the copies of Microsoft Office as opposed to selling a subscription model. From what I can gather, Microsoft will be dumping the BPOS name, which is probably appropriate since that name got so well damaged with the amount of outages they’ve had, so the question of course would be, is Office 365 will it be more reliable than BPOS was?

I’m also curious what’s going to happen to Office—the package version. Microsoft is pretty aggressively positioning Office 365 as a pretty comprehensive solution for a lot of their user base. The impression I'm getting is it’s not just another option—it is being positioned as the primary option and I’m curious as to what’s going to happen to Office the package version, if it’s going to get more expensive or if it’s going to become more of a side dish.

It’s also interesting, back onto the channel point, that they’re launching a Microsoft cloud certification program called “Accelerate.” The details really aren’t out yet, they just announced it, but they’re allowing resellers to get the badge before the details are really available. I think that’s kind of interesting as well. And then to Russell’s point about neutrality, Microsoft hasn’t really been very vocal about net neutrality—a lot of other companies have. Google got into a lot of trouble, because they kind of changed their stance, but I don’t think I’ve heard a Microsoft position or any lobbying effort around net neutrality, I might be wrong about that, but they certainly haven’t been very vocal about it. Those are some of my thoughts.

Don Van Doren: Thanks Dave. This is Don Van Doren. I’d like to pick up on one of the points you made about how initially it looked like perhaps this is just a reaction to something that Google’s doing with their Google Apps. I think an overarching question is, is this something strategically in offense for Microsoft or is it just a tactical defensive move? I think it’s pretty clear that this is moving into a strategic positioning—both in terms of how they seem to be aggressively going after quite a large portion at least of their existing installed Office base, but also the pricing – the word  game changing was used earlier and I think that’s absolutely correct. We’re going to see a lot of changes coming from this and I think initially it’s going to be viewed as just a defensive move by many, but I think frankly it represents a next major step for Microsoft. It will be interesting to see how all that plays out.

Jon Arnold: Jon here Toronto.

Marty Parker: Hi Jon Arnold. What do you have to say?

Jon Arnold: Hi there, everybody. I just quickly want to piggyback on that last set of comments. I agree as well. I think this really does validate the kind of the ascendancy of the cloud and what it means. To me it’s equally as threatening and transformative as the ultimate shift from hardware to software and now we’re seeing kind of the next evolution of software to the cloud.

And what I just want to add to that is – Microsoft did not succeed with the response point and to Dave’s earlier comment about how they’re pricing this for the small business market: they may really only have one more good shot at trying to get into this spase. I think the biggest question I have coming out of all of this is, how much of the business base can Microsoft protect with this approach? They certainly can beat Google on the features, but they really are not the voice player in this and that raises the question to me—where is the control and ownership of the customer going to shift or migrate in this situation? The reseller has a lot to do with it, but you don’t hear the vendors talking about Microsoft as much as they used to now and I think with so many UC alternatives out there, there are a lot of ways to move away from Microsoft now and it’s really interesting to see how they’re going to conquer that. A, as in terms of what their piece of a business they are going to keep, and B, in what mode they are going to keep it in...if it’s going to continue to be a software licensing model or moving more to this cloud and near free based environment, because that brings up the whole scenario of at what point do you start introducing advertising and search into the whole package to make it viable. A lot of interesting questions here.

Marty Parker: I would like to add, this is Marty Parker, one more point that the market reacted very positively to this. The press has pointed out that many of the investment banking firms have raised their guidance on Microsoft by 4 or $5 dollars into the 30 to $33 per share range which is a big jump. So they clearly see this as the right direction for Microsoft and a move that the commentators have said Microsoft is taking with the right level of energy and speed. So, it’s going to be very interesting to watch and I look forward to the conversation that we’ll come back to as we described at the beginning; to discuss how this gets blended into the entire enterprise architecture. I think that conversation will do a lot to answer the questions that have been raised on this call about how this blends in with the environment and to what extent it either protects or extends Microsoft's current offerings to their enterprise customers. So thanks everyone for your time today and we look forward to our future calls on this topic of how Unified Communications will be represented in the cloud. Thanks a lot.