Microsoft rolls out Office 365 in cloud computing race

Microsoft Corp., the 800-pound gorilla of the software world, is hoping it can lift itself into the cloud.

In rolling out Office 365, the online version of its ubiquitous Microsoft Office suite, the Redmond, Wash., technology giant is looking to catch up to rival Google Inc. in the race to move business software residing on local computers to remote data centers accessible from anywhere.

For a monthly fee starting at $6 per user, Office 365 will allow company employees to edit and store Word documents, Excel spreadsheets and PowerPoint presentations online and communicate with one another via email, instant message or video chat as they work on projects together, an element Microsoft said would allow workers to get more done. Larger companies and those looking for more features will pay more per month.

Cloud proponents say companies can cut costs by getting rid of their own servers — which are expensive and require frequent maintenance and security updates — and allowing technology firms like Microsoft and Google to handle the hard work of supplying businesses’ computing needs.


“What happens when Microsoft Office meets the cloud?” Chief Executive Steve Ballmer said at a presentation Tuesday. “Collaboration happens in addition to productivity, anywhere for any business of any size.”

Though Microsoft has for years had a cloud element to its Office suite, the company has struggled to catch up to Google in the online software race. The search giant says its Google Apps software, which also includes word processing, email and other business applications, is used by 3 million businesses and 30 million people around the world.

Still, that number is a small fraction of the 1 billion global users Microsoft says it has for its traditional Office suite, which for years has been its bestselling product. In 2010, Microsoft’s Business Division, which makes Office, was responsible for 30% of the company’s $64 billion in annual revenue.

As businesses increasingly buy into the advantages of the cloud, high-profile companies including Google, Inc. and IBM are competing to be the provider of choice. But with a huge existing customer base, Microsoft is looking to convince its users that moving to the cloud will be easier and less risky if they stick with the familiar Microsoft Office.


“The reality is that Microsoft already has these customers and should easily be able to retain them,” said Brad Reback, an analyst at Oppenheimer and Co. “Businesses in general, especially with something as critical as email, are loath to switch companies like that.”

Microsoft has already encountered a number of difficulties with the precursor to Office 365, called BPOS (for Business Productivity Online Suite). The BPOS system has seen a number of outages in recent months, including a three-day period in May when many customers had to wait up to six hours to receive emails. Microsoft later told customers it had “not been timely enough with information” about the system’s status.

A flurry of hacker attacks in recent months has also renewed questions about the vulnerability of data stored online. In cloud computing, information from many companies can reside on servers at a single data center, potentially allowing hackers to attack multiple targets at once.

As soon as Microsoft announced Office 365 on Tuesday, Google went on the offensive with a blog post entitled “365 reasons to consider Google Apps.”


“Upgrading platforms and adding features results in systems that are increasingly difficult to manage and complex to use,” the post started. “At times like these, it’s worth considering a clean slate: an approach based on entirely modern technologies, designed for today’s world.”