80 million Exchange Online users as Office 365 progress continues

80 million Exchange Online users as Office 365 progress continues

Microsoft’s latest results (for the second quarter of their FY15 year, released on January 26) contained the interesting news that “Commercial cloud revenue grew 114% driven by Office 365, Azure and Dynamic CRM Online, and is now on an annualized revenue run rate of $5.5 billion.“

Microsoft didn’t break out the $5.5 billion to say how the revenue broke down across Office 365, Azure, or Dynamics Online CRM, but my bet is that a substantial amount of it is gathered by Office 365. Given the impetus that I see for Office 365 in the field and the number of success stories touted by Microsoft on the Office 365 blog, my best guess is that Office 365 will achieve an annual run rate of $4 billion by the end of Microsoft’s fiscal year (June 30, 2015), or an increase of $1.5 billion in a year.

Microsoft also doesn’t publish any numbers for paid Office 365 subscriptions. I attempted to interpret the data last year and concluded that some 29.7 million paid subscribers used the service then. The new data indicates that the number is now around 46.2 million paid subscribers plus a heap of free users (trials, academic, schools, Microsoft itself, and so on). The total number of people who connect to Office 365 might now be close to 80 million.

Granted, I can’t guarantee these figures as they are all based on an annual run-rate and a heap of guesswork. But the same guesswork is being applied consistently, which I know is a sort of oxymoron, so we can say that all signs show that Office 365 continues to grow strongly on an upward trajectory as companies move workload from on-premises to the cloud.

Last October, Microsoft CEO CEO Satya Nadella said at a Gartner conference that: “Office 365 is the new Exchange and one will cannibalize the other. The key is to ensure that current Exchange customers can transition on their own terms.” Exchange is the gateway drug to the cloud, largely because it is so easy to move email workload now. Microsoft’s investment in engineering solid hybrid connectivity has paid off as has the hard work done by many third-party ISVs whose migration products allow mailboxes to be moved to Office 365 from Exchange and many other email systems. Binary Tree, BitTitan MigrationWiz, and Skykick are among the companies I hear mentioned a lot when it comes to migration projects, but there are many others. And of course, there's the free Office 365 FastTrack Onboarding service for those who have relatively uncomplicated mailboxes to move.

Last year I calculated that Office 365 had captured almost 10% of the total Exchange installed base. Now it looks like Office 365 will have consumed another 5%. The majority of users are still on-premises, but their numbers are going down as mailboxes move to the cloud. The best guess of how things will settle down remains that of Exchange development VP Perry Clarke, who agreed with me in a December 2013 interview that “somewhere in the region of 40 percent of the total installed base will likely continue using on-premises software for at least the next several years.” Of course, “region” is a pretty flexible term and might mean 45% or, more likely, 35% given the velocity we see today.

Exchange Online customers will be pretty happy with what they’ve seen in the last year. Good availability (the June 24 outage notwithstanding) and lots of new functionality (Clutter, People View, Office 365 Groups, and many tweaks to Outlook Web App) is a pretty nice package. The hope now is that the on-premises crowd will get a nice surprise when Exchange 2016 ships late this year. It would be nice if that were so.

Follow Tony @12Knocksinna

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