Microsoft aims Office 365 at small businesses

Microsoft CEO Steve Ballmer played up how Microsoft's new cloud office service could help small businesses

For the launch of its first full-fledged online office suite, Office 365, Microsoft is paying particular attention to how the new service could help small and medium-size businesses.

"While we launched Office 365 for all customers, we wanted to focus today on the small and mid-sized opportunities," said Kirk Koenigsbauer, Microsoft corporate vice president within the Microsoft Office Division product management group, in an interview with the IDG News Service.

During his presentation in New York, Microsoft CEO Steve Ballmer dropped the names of large companies already using Microsoft cloud services, including DuPont, Hyatt, Starbucks and Volvo. However, the company's overall marketing emphasis was centered on making Office 365 as appealing as possible to small and medium-size businesses (SMBs), which spend US$800 billion annually on IT products, according to Gartner estimates.

That market is fragmented in terms of what Microsoft products are being used, Koenigsbauer elaborated. Some may be using older versions of Exchange or Microsoft Office, or may just may be using a mish-mash of different products. Worse, many organizations have small, if not non-existent, IT departments.

"Cloud services are a great value propositions for SMBs," Koenigsbauer said. "They have very small IT staffs. They don't have the infrastructure. They don't have the capital to buy new racks of servers."

More than 70 percent of the users of the Office 365 beta versions were small and medium-size businesses, Ballmer said. He ticked off a list of potential types of users for the new service, including real estate agents, accountants, lawyers, cleaning services and auto dealerships.

Office 365 can be exciting "particularly for companies that have little or no IT support and very little time and financial resources to dedicate to technology," he said. "Office 365 ... is a big step forward. These businesses really will be able to let their employees share information in new ways."

At the press event, Microsoft gathered representatives from a number of small and mid-sized organizations that have tried Office 365 in its beta form. Chiefly, these businesses seemed most interested in using Office 365 as a way to avoid maintaining in-house Microsoft Exchange servers.

One company considering its use is the Hendrick Automotive Group, which operates 75 car dealerships throughout the U.S.

"For us, one of the reasons we're looking at Office 365 is that we have a very small IT department. By moving services to the cloud we will be able to realign those resources to those applications that are unique to our industry," said Robert Taylor, who is the director of information technology for Hendrick. "We'll be able to deliver applications faster to our users."

Currently, the company runs a centralized pool of Exchange servers. Its IT services department supports around 4,000 users with a staff of only 13. The company also uses Microsoft SharePoint as an aid to help train employees, and get personnel from new dealerships up to speed.

Another company testing the technology is Perkins Eastman, an architecture firm. Based in New York, the firm has 600 employees across 13 offices worldwide, which are supported by an IT staff of 14. "We're constantly looking for ways to be more efficient," said Hamilton Esi, who is director of practice applications for the firm. "Office 365 was a natural transition for us, because of its value proposition."

The company has been testing the service since December, first with 15 e-mail accounts, then with 50 mailboxes. "Down the road, I see the entire organization moving over to the cloud," Esi said.

Chief to the appeal of Office 365 for Esi is the ability to quickly spin up new accounts for new offices. The company is rapidly expanding, and plans to open two offices this year. With Office 365, the company can centrally provision email accounts without the need to set up separate servers in new locations. Employees can get their email accounts even before the office is fitted with a new Internet connection. "We now have the ability to set up the office in record time," Esi said.

One area in which Microsoft will still have to prove its mettle is with the service's up-time. The company's precursor to Office 365, BPOS (Business Productivity Online Suite), had experienced a number of outages.

Koenigsbauer has noted that Office 365 apps inherently are different from BPOS ones in that they were designed to work in multi-tenant environments, which should minimize troubles. Ballmer promised that the SLA (Service Level Agreements) for Office 365 will be "the best in the industry."

Office 365 may ultimately prove to be more reliable, agreed Scott Gode, vice president of product management and marketing for Azaleos. Azaleos offers a service to manage federated Active Directory instances, which will be essential for blending internal office use and Office 365 deployments under a single-sign-on.

The mistakes Microsoft made with BPOS come with the territory of ramping up a new service, he explained. However, Office 365 is a higher profile service for the company, and so Microsoft has probably devoted more resources to keeping it running. Engineers have also probably learned from running BPOS.

"We've been affected by the [downtime], but we don't expect it to be totally without hitches," said Chris Robert, senior manager for information security for Scripps Network Interactive, which runs a number of cable channels such as the HGTV.

When Scripps was spun out from its parent company, Scripps Co., management decided to switch over to BPOS for all employee e-mail needs. The company has been using the service for several years now. "Overall, we're pretty happy with the [BPOS] service. It is quite a bit more stable," than a typical in-house implementation, Robert said, noting that in-house email servers can go offline as well. "People have forgotten. It's not like we've never had downtime," he said.

Joab Jackson covers enterprise software and general technology breaking news for The IDG News Service. Follow Joab on Twitter at @Joab_Jackson. Joab's e-mail address is