Microsoft CEO Steve Ballmer wasted no time in his keynote at the Office 365 launch in mentioning that Office 365 is an ideal solution for SMBs.
"Small and midsize businesses represent two-thirds of global job growth. But they need an edge that doesn't require big investment and complex IT infrastructure."
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Office 365, according to Microsoft, provides that edge by eliminating the need for physical servers, the management of those servers, and complicated software licenses.
Microsoft's rebranded and revamped cloud service -- which brings together Microsoft Office, SharePoint Online, Exchange Online, and Lync Online -- is an enticing offer for smaller companies because it can save money quickly and reduce manual labor. One small business at the Office 365 launch, temporary housing provider Travelers Haven, claims they will save $100,000 a year and cut 30 hours of work a day across its 35 employees by switching to Office 365.
But for enterprises that have heavily customized, mission-critical applications, and thousands of employees, Office 365 does not provide enough functionality to warrant a wholesale enterprise move to the cloud, according to Forrester analyst TJ Keitt.
"On-premise remains more functional for enterprises than the cloud, at least for now," says Keitt.
Nevertheless, enterprises should not dismiss Office 365 as just for SMBs, says Keitt. For an enterprise to take advantage of a cloud model like Office 365, it must take an extensive look at its inventory and its workforce behavior, and figure which workloads can go off premises.
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"Every enterprise is different, but you'll mostly see Exchange migrations to Office 365 happening first in the enterprise. For SharePoint, it's more effective to have it on-prem because of all the customization that many enterprises do to SharePoint sites," says Keitt.
Microsoft is indirectly admitting the limitations of the cloud by promoting the hybrid method where a company can run, say, SharePoint on-premise and Exchange and Lync in Office 365, and have the two worlds integrate seamlessly -- at least that's the promise.
Kirk Koenigsbauer, senior VP of the Microsoft Office Division, says that someday 90 percent or 100 percent of the enterprise apps will be in the cloud. But the next three to five years will be a transition period.
"We follow the mentality of delivering the cloud on the customer's terms," says Koenigsbauer. "I do think workloads like Exchange will go to the cloud faster than SharePoint. When customers have done lots of SharePoint customization with line-of-business data and have developed complex workflows, then SharePoint may be better suited on-prem."