Productivity tools morph into online services

Productivity tools morph into online services

Microsoft Online Services puts hosted versions of Microsoft communications and collaboration suites within reach of small businesses.

• Customers can buy Microsoft services as a suite of bundled offerings or individually.


• Online software is a great option for small businesses that need more functionality but don't have the infrastructure or IT skills to support it.


• They often work for several companies.


• Partners can still host the software if you have specialized industry and customization needs.

If you think managing and supporting software assets takes too much time and money, it may be worthwhile to check out Web-based solutions. Also known as hosted software or software as a service (SaaS), Web-based applications are on the rise among small and midsize businesses.

SMBs are expected to spend US$1.6 billion on SaaS in 2008, according to a study by AMI-Partners, an IT research and analysis firm in New York. The study's authors predict 20 percent annual growth in SaaS over the next five years, fueled by a groundswell of offerings by both upstart and established IT vendors.

Case in point: Microsoft is making its biggest jump into the services game this fall, offering Exchange Online and Office SharePoint Online together with Office Communications Online and Office Live Meeting as a suite of services or as individual service offerings. Called Microsoft Online Services, the suite allows employees to access e-mail, calendaring, contacts, shared workspaces, and Web conferencing. What's more, IT departments will have to manage much less in-house. Customers can sign up directly with Microsoft to obtain the service.

Microsoft partners have been providing hosted versions of these collaboration applications as far back as 2000; hosted Microsoft Exchange has been available as a dedicated service for enterprise customers (5,000 seats and higher) since September 2007. Partners can continue to sell their own services or become a reseller of the Microsoft services. Either way, customers will have a choice. Going with a partner might be a better fit for organizations that have particular business or industry requirements, such as auditing or compliance for e-mail, or need customizations and other services such as data migration and integration.

How Microsoft Online Services works

Microsoft's new online options provide any size business with access to online productivity suites in a multi-tenant hosted arrangement, dubbed the Standard tier. Multi-tenancy means that Microsoft supports many customers on the same infrastructure to keep costs down.

Through a secure Web-based interface, IT managers can monitor the services, add and configure users, and submit and track support requests. "We view security as table stakes," says John Betz, director of the Microsoft Business Online Services group. "We do that from physical security at the data center to logical security around customers who will access the information." With the company's previous experience hosting Exchange Server and Live Meeting, Betz reports that Microsoft can deliver a service level agreement of 99.9 percent uptime. If Microsoft does not meet that SLA, the company will refund a portion of service fees, he says.

Analyzing the trend

At the macro level, online business applications can offer a clear return on investment for SMBs that often hoard cash, expertise, and/or IT staff. "If you are running your own Exchange and SharePoint servers in your own data centers, you have to manage them, and they are sometimes hard to manage," says Paul DeGroot, an analyst with the independent research firm Directions on Microsoft, in Kirkland, Washington. "It's costly to have people on staff who have those skills. Microsoft is saying you don't need that expertise; we can do it very efficiently for you."

Adds Laurie McCabe, vice president of SMB Insights for AMI-Partners: "If you're considering a new application like sales-force management, you have to consider if you really want to hassle with buying another server." According to McCabe, applications that are complex to deploy and support in-house, such as e-commerce, mobility, and sales tools, are especially popular SaaS options. And horizontal communications and collaboration tools that are not core to your business make more sense as a managed service. "Exchange is a very easy decision to outsource," she says. "A lot of SMBs are starting to move it off-site."

Bigger bang for the buck

By offering these online services as a bundled suite of Exchange, SharePoint, Office Communications (IM, presence, videoconferencing, and more), and Office Live Meeting (Web conferencing), Microsoft aims to give SMBs new to collaboration software more bang for their buck. The Standard suite costs US$15 per user per month, a 38 percent discount off stand-alone services, according to Betz. In addition to options for purchasing the services individually, Microsoft also offers a "deskless" worker suite: a basic version of Exchange Online and SharePoint Online for US$3 per user per month. (Existing customers with Software Assurance on their Microsoft Client Access Licenses can purchase a user subscription at a discount.)

Aside from cost savings, Betz says that the suite is designed to work together with Microsoft Office for the best return on investment. "A lot of the communications capability in Office is not available until you are running these server apps behind the scenes," he says. By example, Betz refers to the integration of SharePoint document management and workflow features across the Office suite, and the integration of Live Meeting with Microsoft Office Outlook for easier scheduling of meetings. Microsoft does not offer the Microsoft Office suite as an online service; however, Microsoft Office Live is an online workspace offering where employees can post, share, and edit Microsoft documents with others (think of it as a basic version of SharePoint).

DeGroot is circumspect about the actual integration customers will see with the new online suite, pointing to the lack of integrated messaging as one example: "I still can't get my voice mail into my Exchange inbox, which I can do with on-premise [applications], so you could almost say it is a less integrated solution now." He notes that online versions are "almost a generation behind" current on-premise applications, but McCabe observes that for many users those advanced features-such as unified messaging and some of the business intelligence features in SharePoint-aren't critical. "Once again it's the 80/20 rule-what do you really need?" she says. According to Betz, Microsoft is working to make the feature disparity a nonissue in the future.

The decision to go online or not, says Betz, may depend on whether you have, or plan to have, a customized application from a third party that sits on SharePoint. Microsoft cannot currently support those customizations as a service, but is working to resolve customization support issues in future versions of Microsoft Online Services. A business can, however, customize SharePoint Online in terms of custom workflows and/or integration with line-of-business applications via Web service calls, he says.

Businesses should look at all the factors that go into software deployment-people, hardware, and middleware-and then compare those costs to the subscription costs, McCabe says. She suggests heading to the Web to find a wealth of TCO comparisons on hosted versus on-premise software.

Regardless of whether you go online with your business productivity applications, consider how your business may benefit from simplifying fundamental IT services such as e-mail, IM, and collaboration. McCabe says the biggest benefit for the SMB is reduced complexity. "It's taking a lot of hassle out of using the software," she says.

Polly Schneider Traylor writes about business and technology from San Mateo, California.

Related Links

Microsoft Office Communications Online

Microsoft Online services free trials