Microsoft Gets It Right with Office 365

Sometimes Microsoft really surprises me, in a good way, by actually listening. The company doesn't always move as fast as I'd like, but I understand the underlying reasons why it must be so. And when they do actually respond to user needs, the results are often wonderful.

This has been a great year for this kind of thing. Windows Phone 7 is an obvious example, the result of really thinking about how people use their phones and not just aping Apple's iPhone strategy, as Google did. Windows Small Business Server "Aurora" is another one—it's the SBS product I've been practically begging Microsoft to make.

And now we have Office 365. With the understanding that I don't yet have the service here in front of me, it does appear that Microsoft has pulled off a powerful cloud computing trifecta with Office 365, and has possibly gotten the pricing right, even for small businesses. I'm crossing my fingers and holding out for the real deal, but what I've seen so far has me quite interested.

Office 365 is a bit hard to characterize, but only if you're among the handful of people who is actually familiar with Microsoft's current generation of disparate and largely disconnected productivity-oriented online services. These include BPOS (Business Productivity Online Suite, which included Exchange Online, SharePoint Online, Office Live Meeting, and Office Communications Online), Office Live Small Business, and Live@edu (hosted email, calendar, and contacts for educational institutions), as well as Office Web Apps (which will still be available separately).

So Office 365 is, first and foremost, an attempt to combine these previously separate services under a single brand. This is very smart.

But Office 365 isn't just a brand. It's also a way to sell productivity software services on a subscription basis. And for once, Microsoft is actually targeting businesses of all sizes. Indeed, according to the software giant, Office 365 is designed to meet the needs of businesses of all sizes, from one to one million.

That's cute, but let's see how it plays out in real world terms. On the low-end of the spectrum, cost-wise, is Office 365 for Small Businesses. This service is targeted at businesses with 25 or fewer users. It will cost $6 (in Europe, 5.25 euros) per user, per month. (And unlike with BPOS, there isn't any minimum license purchase, one of my big complaints about that service.) For this price, you get Office Web Apps, Exchange Online, SharePoint Online, Lync Online and a hosted external website, the latter of which is similar to what the company currently offers through Office Live Small Business.

An enterprise version of the service, aimed at midsized and large businesses, also provides the PC-installable, client version of Office 2010 Professional Plus, voicemail capabilities, enterprise-class social networking, instant messaging, web portals, extranets, voice conferencing and videoconferencing, web conferencing, 24x7 phone support, on-premises licenses, and more. This costs $24 (22.75 euros) per user per month, but in keeping with the sliding price scale used with BPOS, you can alternatively get lower-end versions of the service (sans Office 2010 Pro Plus and the other perks) from $2 (1.75 euros) per user per month and up. Microsoft is also working on a dedicated, "private cloud" version of Office 365 for those very largest businesses.

The combination of Office 365 with SBS Aurora (and for some users, some client version of Office 2010) could very well be the "small business starter pack" I've been thinking about for some time. And while the pricing isn't quite in-line with Google Apps Premier Edition—which costs $50 per user per year—Microsoft is correct in its assertion that there's almost no comparison. Gmail and Google Calendar are highly valuable solutions, but the rest of Google Apps is, well, crap.

While I do believe Microsoft should simply meet Google's pricing, we'll see whether the additional $22 per user per year (annual price difference between Office 365 for Small Businesses and Google Apps) is enough to turn off small businesses. And we've got a ways to go: You can currently sign up for the Office 365 beta, and the final shipping version of the service is due to hit sometime in 2011. I'm eager to give it a shot.