Office goes on Cloud

The office utility from Microsoft, finally goes online. Last week one of the most awaited service from Microsoft was launched with much hype in 40 markets worldwide, allowing users to access Microsoft Office, SharePoint Online, and Lync Products online.

Now the documents can be accessed from anywhere and can be simultaneously worked upon. The idea triggered in 2007 by none other than our own Sabeer Bhatia (also founder of hotmail, first free email service) with the launch of Office Live, followed by Google docs and now Microsoft coming with it's complete Office utility on internet cloud.

Three versions of the product are available:

1. O365 for SMBs (less than 25 employees) with monthly pricing of $6/user.
2. O365 for Enterprises with pricing ranging from $2/user to $27/user on a monthly basis
3. O365Education, that is expected to replace LiveEdu

The product promises to be a cost effective option for users. However, it’s not the direct license cost where customers are saving money. It’s actually IT overheads and administration costs where SMBs are likely to benefit. For example, for a 100 employee enterprise deploying the $27/user/month plan, the annual cost is $32,400 at full price; Microsoft Office 2010 retails at $49,900 for 100 licenses at full price (ex. Implementation and administration). Thus, from second year onwards, Microsoft is actually making more money. However SMBs are actually benefiting as they don’t have to spend too much on IT overhead and infrastructure.

Until now Microsoft has been struggling with piracy, specially in emerging markets with higher growth potentials than the stable markets. Now the users will have a cost effective option, saving a lot of revenue for company. Assuming Microsoft can also maintain 75-80% margins as other SaaS vendors, this could be a win win situation.