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Doug Henschen
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Microsoft Exec Says Cloud Strategy Is Right On Track

Office Division president Kurt DelBene details customer wins, Office 2010 sales gains and software-as-a-service imperatives headed into 2012.

Microsoft's hybrid on-premises and cloud-based collaboration and productivity applications strategy is on track. At least that's the state of affairs in Redmond according to Kurt DelBene, president of the Microsoft Office Division.

DelBene was in New York on Thursday to detail the progress of Microsoft Office 2010. In an interview with InformationWeek at Microsoft's offices, DelBene also offered insights on cloud-computing customers and the division's focus over the next 12 months.

DelBene began by announcing four significant customer wins:

Shell Oil is moving to a cloud-based deployment of SharePoint 2010 and SharePoint Online that will support worldwide collaboration with potential use by more than 100,000 employees.

Advocate Healthcare is replacing a disparate collection of e-mail and messaging apps with enterprisewide use of Exchange Online by 29,000 employees. An estimated $4 million in savings will be had from the combination of lower software and hardware expenditures and reduced IT labor around e-mail administration.

Manpower Inc., an employment agency that has more than 30,000 employees across 3,900 offices in 82 countries, is replacing a patchwork of systems by consolidating on Exchange Online. Savings are estimated at $2.2 million annually.

Tampa General Hospital is switching from Lotus Notes to Exchange Online. DelBene said the option of hybrid on-premises and cloud-based deployment appeals to the organization because it envisions buying other hospitals. Given that some 70% of organizations have standardized on Exchange Server, according to DelBene, acquired hospitals are likely be running on Exchange; thus, post-merger integration will be easier.

Office 2010 Progress

DelBene cited several data points about Office 2010's sales progress. For example, sales in the consumer segment have increased 49% year-over-year while business sales have increased 24%. From what level to what level? DelBene declined to offer dollar figures, but keep in mind this is really end-of-life Office 2007 sales vs. brand new Office 2010 sales.

Microsoft press releases now claim that Office 2010 is 50% ahead of where Office 2007 was during its comparable launch period. But Office 2007 was hamstrung on two counts, as I recall: first, many users had qualms about the then-new Ribbon interface; and second, 2007 came out in the same general time frame as Windows Vista, a dud when it came to driving wholesale replacements of corporate PCs.

Windows Vista failures are now Windows 7 gains, where operating system refreshes are concerned; DelBene acknowledged that Office 2010 has benefited from strong demand for corporatewide Windows 7 upgrades, as new PCs are typically bundled with new productivity suites.

But aren't we in the post PC era, with smart phone and tablet sales now outpacing PC sales? (And the interview took place before HP's WebOS-on-PCs news really broke, so we didn't even talk about the prospect of a post-Windows era.) I'll share what DelBene had to say about smart phones in a moment, but he seemed to dismiss the threat from tablets.

"The forecast is for well over 300 million PCs to be sold in 2011, which dwarfs the size of any alternative device, so you have to keep things in perspective," he said.

So only 15 million tablets were sold in 2010, but that doesn't mean you can dismiss their influence. I've heard too much about iPad-toting CEOs, CIOs and corporate boards to take these devices lightly. What's more, IDC estimates tablet sales will spike to 42 million in 2011.

Mobile According to Microsoft

On the smart phone front, IDC expects 330 million of these devices to be purchased this year. Even if DelBene doesn't think of smart phones as PC alternatives, he agreed that mobility is having a tremendous impact on corporate computing. This led to a discussion about Windows Phone 7 and their native Word, Excel, PowerPoint and SharePoint apps that can to tap into Microsoft servers and services.

DelBene also talked up Microsoft's partnership with Nokia. I offered a jibe about cutting a deal with former Microsoft executive Stephen Elop (DelBene's predecessor), who was named Nokia's CEO in September. DelBene parried, pointing out the partnership was initiated before Elop joined Nokia.

But forget about Windows Phone 7 and Nokia. What about the dominant mobile market of today, as in iPhone, Android and BlackBerry devices? What is Microsoft doing to make Office and its cloud offerings compatible with these devices, I asked?

"The first workload that will move to the cloud is messaging," DelBene said. "We have been engaged with all cell phone manufacturers over the last several years to license our Exchange Active Sync (EAS) protocol."

The result, he said, is that there isn't a smart phone on the market that doesn't have the ability to connect to Exchange email servers. Microsoft is also building software for non-Windows phones, DelBene said, pointing to a Microsoft OneNote app for the iPhone.

Let's be honest: Windows 7, Nokia and a OneNote app for iPhone simply isn't enough.

Given the bad blood between Google and Microsoft, let's assume we'll never see Office apps on Android. But I have to believe that sooner or later, Microsoft will see the light and at least offer Word, Excel and PowerPoint apps for the iPhone. Sure, you can view Word docs on iPhones and iPads. But third-party app providers are capitalizing on interest in Office document editing. It makes no sense for Microsoft to ignore this opportunity.

Future Focus

Looking ahead, DelBene said Microsoft would stick with current themes, particularly its focus on helping customers move into cloud computing. Half of Microsoft's revenue for SharePoint, Exchange and Dynamics CRM will come from cloud deployments within four years, DelBene predicted, and he said the company is developing, planning and hoping for even higher numbers.

As of today, at least 50% of cloud app usage is driven by viewing of email attachments, he said. So Microsoft will continue to focus on "full, rich-client fidelity" and symmetry between the on-premises and on-demand viewing and editing experiences. It will also step up video, image and graphical content creating and editing capabilities, he said, and here, too, functionality will be consistent across on-premises and Web-based interfaces.

New functionality is always appealing, but the real driver of enterprise customer wins, DelBene said, is Microsoft's support for hybrid deployments. Thus, flexible licensing terms, easy-to-use migration tools and bullet-proof synchronization between on-premises and on-demand deployments is what companies really want.

"Companies are looking to get the same capabilities in the cloud that they now have on premises, and they want to do that in a flexible way," he said. "There's not a single one of our customers who says, 'flip the switch, I'm moving everything today."

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