prevent further incursions.”
Google claims that 4 million-plus businesses are
using its hosted application suite, while Microsoft
has reportedly claimed that 3 million to 5 million
O;ce 365 user licenses have been sold.
Google Apps has gained some highly publicized
large customers for its hosted software suite,
including the city of Los Angeles (minus its police
department), the city of Pittsburgh and the National Oceanic and Atmospheric Administration.
The LAPD pulled out of the Los Angeles move to
the cloud because of security concerns.
Cain said Microsoft’s plan to begin o;ering
a free version of O;ce 365 for Education this
summer, and to aggressively cut the prices of
other versions, is strong evidence that it’s girding
for battle with Google.
“Microsoft dropped fees simply because Google
does not charge [education] customers,” said Cain,
noting that Microsoft was “increasingly losing
share” in that crucial market.
In a blog post,
Michael Osterman,
president of Osterman Research,
contended that the
price cuts are likely
an attempt by
Microsoft to spur
sales of O;ce 365
among enterprise
customers.
It isn’t clear
whether Microsoft’s pricing strategy will succeed, because there’s
“substantial variation” in how demand increases
after price cuts, Osterman said.
Osterman’s research shows that when cloud-based email services are priced at $20 per seat per
month, the market of “likely or definite adopters”
is equal to 16% of midsize and large companies. At
$15, the share of likely or definite adopters jumps to
27%, and at $10, it jumps to 49%.
“I suspect that Microsoft has done its own
research and come to a similar conclusion — that the price cuts
may be significant enough to create su;cient demand among its
potential enterprise customers,” Osterman wrote.
The decision to cut O;ce 365 prices came just a couple of
weeks after Microsoft disclosed that it had started constructing
a new $130 million data center in Dublin that will be used to run
cloud services for its growing European customer base. A spokeswoman wouldn’t say when the new facility will open.
Because the price cut came early in O;ce 365’s life, it could
convince wavering customers to stick with Microsoft, said Rebecca
Wettemann, an analyst at Nucleus Research. She noted that it’s
“better for Microsoft to capture those customers at a lower price
point than have Google or someone else compete for them.” ;
Perez is a reporter for the IDG News Service. Mikael Ricknäs
of the IDG News Service contributed to this story.
Microsoft President Steve Ballmer isn’t ready to concede the hosted apps market to Google.
Microsoft Moves to
Slow Google Apps
The price
cuts reflect
Microsoft’s fear
of Google.
— MAT THEW CAIN,
ANALYST, GARTNER
Microsoft hopes a quick Office 365 price cut can
help it blunt the strong rise of Google’s cloud
application suite, analysts say. By Juan Carlos Perez
MICROSOFT IS cutting the price of its cloud-based service, O;ce 365, by up to 20%, to improve its chances of success in the enterprise market and to stave o; competition from Google Apps, analysts say.
Microsoft itself says the cost of running the cloud suite, which
typically includes hosted versions of Exchange, O;ce, SharePoint and Lync, has fallen and thus the price cut announced
earlier this month is simply “passing on” savings to customers.
Nonetheless, Gartner analyst Matthew Cain says it’s clear that
Microsoft is responding to Google’s success in selling its cloud-based services to businesses.
“The price cuts reflect Microsoft’s fear of Google,” Cain said.
“Google Apps for Business has increasing momentum in the
enterprise sector, and Microsoft is doing everything they can to
