What Office 365 says about Microsoft

Even as Microsoft rolls out its Office 365 cloud offering, the company stubbornly doubles down on the desktop

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How to pay more for Office

What you get with the small-business version of Office 365 is a 2010 upgrade plus a price break: $6 per user per month instead of $10 per user per month for BPOS. The enterprise version with Office Professional Plus will cost $24 per user per month, or $288 per year -- roughly double the annual retail price of Office 2010 Professional spread over three years.

So the main value proposition of Office 365 is that customers don't need to maintain Exchange or SharePoint servers anymore. Not having to pay for that infrastructure -- as well as eliminating the overhead of patching and upgrades -- should lead to lower cost of ownership, perhaps equaling that of the added cost for Office 365.

But Microsoft isn't leading with that benefit, probably because it doesn't want to offend partners that run the plumbing for Microsoft software in small business. Instead, it's waving its hands and pitching Office 365 like it's some whole new cloud proposition, which it isn't because BPOS has been around for two years, and either way, partners know they're getting the shaft when Microsoft does the hosting.

Tha hazards of half-measures

Meanwhile, we hear from various sources that a number of enterprises are thinking about cutting way back on their Office licenses and -- believe it or not -- moving to Google Apps Premier Edition for rank-and-file users at a cost of $50 per user per year. For those customers, Office licenses will be left to those who need high-end capabilities.

I get the Microsoft vision: the cloud as extension of the desktop, not a replacement, with more and more collaboration, mobile support, and gnarly server administration moved to Microsoft's cloud over time. That's fine as far as it goes. But at some point, Microsoft needs to come to terms with the fact that -- whether through licensing or by subscription -- desktop software will never again be the cash cow it once was.

Sooner rather than later, at cloud rather than desktop prices, Microsoft needs to start delivering valuable, core productivity services in the cloud that don't require a big fat footprint on the desktop. If it doesn't, I know of at least one company that's happy to pick up the slack.

This article, "What Office 365 says about Microsoft," originally appeared at InfoWorld.com. Read more of Eric Knorr's Modernizing IT blog and get a digest of the key stories each day in the InfoWorld Daily newsletter and on your mobile device at infoworldmobile.com.

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