Microsoft Drops Prices Of Cloud Apps

One week after a high-profile loss to Google for 30,000 e-mail accounts for the city of Los Angeles, Microsoft has come out swinging.

Microsoft has lowered the subscription prices for its cloud computing applications, and has announced new customer wins and broader geographic availability for the apps.

The software giant has lowered the price of its Business Productivity Online Suite (BPOS), which includes online versions of Exchange, SharePoint, Office Communications and Office Live Meeting, from $15 a month per seat to $10 a month.

For Exchange Online alone, its email software-as-a-service, the price drops from $10 to $5. Microsoft also has increased its standard e-mail storage per user from 5 Gbytes to 25 Gbytes -- the same amount that Google provides for Google Apps subscriptions.

Microsoft BPOS has been generally available for just several months, and competes with Google Apps, Zoho Mail, Yahoo Zimbra, and the newest entrant, IBM Lotus Notes Hosted Messaging. Although Microsoft has disclosed the names of several large companies that are implementing BPOS or Exchange Online -- including its largest, GlaxoSmithKline, with 110,000 seats -- it has released 11 more names, including Aon Corp., Aviva PLC, McDonald's Corp., and Tyco Flow Control. Aon, which is transitioning all 36,000 employees to Exchange Online, is the largest customer win disclosed this week.

Microsoft also announced that BPOS and Exchange Online are now available in Singapore, and will be available in India later this year. The SaaS apps already are available in more than 15 countries, and Microsoft has trials underway in more than a dozen additional countries.

European customers will be served their SaaS apps from a new data center in Dublin and another in Amsterdam. Asian customers will be served from Microsoft's Singapore data center and a newly built one in Hong Kong. U.S. and Latin American customers will be served from from data centers in Texas, Virginia, Washington, and a newly built one in Chicago.

These announcements come one week after the city council of Los Angeles voted to replace an aging Novell GroupWise email system with Google Apps, beating out Microsoft Exchange Online.

Ron Markezich, corporate VP of Microsoft Online, says the price drop is not in response to what happened in Los Angeles. "We've achieved a level of scale we didn't have a year ago, and have made a number of software investments that allow us to drive down costs and have more efficiencies," he said.

Still, are Microsoft's cost cuts enough? Google Apps, by comparison, which includes apps for documents, spreadsheets and presentations, in addition to email, costs only $50 per user per year. Markezich's response is that Microsoft offers a scaled-down version of Exchange Online, designed for employees who aren't frequent PC users, for $24 a year, and a scaled-down version of BPOS for $36 a year. What's more, "we're not seeing any inclination that Zoho or Google or Zimbra or any other of those offering fake Office capabilities can replace [Microsoft Office]," he said.

Microsoft's online, subscription-based versions of Office apps are in development and aren't due out until the first half of 2010.

CIOs choosing BPOS or Exchange Online over Google Apps and others typically cite three key factors: seamless integration with on-premises instances of Exchange or SharePoint; familiarity with the Microsoft platform; and an easy exit strategy if they decide they don't like cloud computing.

"I don't think it's any secret that it’s a big change to take your company to Google; it's a different environment," said Tony DeGregorio, VP and Global CIO at Tyco Control Flow, a manufacturer that will have 12,000 employees on Microsoft Exchange Online by December.

Tyco is replacing a combination of on-premises Exchange and Notes platforms that it's adopted due to various acquisitions in recent years. And with Google Gmail, "an exit strategy for that type of environment lends itself to challenge," DeGregorio said. "With Microsoft, I'm in an Exchange environment. If I want to leave (Exchange Online) I can pick that up and move it to my own Exchange environment. It's not a proprietary type of environment."

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