In-Depth

Office 365 Reader Review: Testers Reveal Secrets

IT pros weigh in on Microsoft's ambitious plans to deliver everyday productivity to the cloud.

The arrival of Office 365 is a complete shift in how Microsoft will offer its flagship software -- Exchange, SharePoint, Lync and, perhaps most notably, Office -- to enterprises of all sizes.

Not only does Office 365 make some of Microsoft's most widely used software available as a hosted service, but it brings these wares together as one product, available for a monthly subscription fee. Think of it as Office times two.

It remains to be seen how big a hit Office 365 will be out of the gate, but all indications suggest Microsoft's effort to bring its core applications to the cloud represent the future for how many IT organizations will deliver productivity software to their employees and manage it. Bringing collaboration, document management and communications into one suite also represents the future of how many people will work. And for Microsoft, it reshapes the business model for its most lucrative products.

It's no secret that Office is a cash cow for Microsoft. The company says it sells a copy of Office 2010 every second. Growth for the most recent quarter alone was 21 percent over the previous year on sales of $5.3 billion. SharePoint and Exchange are also billion-dollar businesses for Microsoft. Why mess with that success when you can expand it instead? Can Office 365 be as lucrative as a service as the products it's essentially bundling as a service?

"We're feeling quite good about the momentum," says Tom Rizzo, senior director of Microsoft Online Services. Office 365 is set to arrive amid intense competition from Google Inc. as it pushes Google Apps -- a collection of messaging, calendaring, collaboration and productivity apps that are Web-based -- into the enterprise. Meanwhile, IBM Corp. is pushing LotusLive into the same cloud space.

"I think small and medium businesses will be quicker to adopt Office 365 because they don't have a lot of existing IT investment they have to move."

Tom Rizzo, Senior Director, Microsoft Online Services

Office 365 is not an entirely new concept for Microsoft: The company sells hosted versions of Exchange, SharePoint and Office Communications Server (the predecessor to Lync) through its Business Productivity Online Suite (BPOS), and has for several years. But Office 365 steps it up by tying them all together more seamlessly and bringing the coveted Office productivity suite into the mix. For companies that don't want to invest in the Office desktop package, Microsoft is offering versions of Office 365 with a scaled-down, Web-based version of the suite, appropriately called Office Web Apps.

Office Web Apps
"The Web version of Excel, PowerPoint and Word is pretty slick," says Derek Major, CEO of Eligeo IT, which is looking at using Office 365 internally, as well as selling the product to clients.

Lou Kalis, a data services specialist and consultant for the School District of Onalaska, Wis., has been testing Office 365 for several months, and he likes the Office Web Apps

client, which he envisions using on the district's Macintosh computers and PCs, as well as iPads in the future. The district has a hodgepodge of productivity suites, including AppleWorks, OpenOffice and various versions of Microsoft Office.

"We need to standardize, and this is part of it," Kalis says. "Standardizing gives access to people outside of the district, which we haven't done yet."

One issue is bandwidth. Right now, the district only has 30Mbps connectivity for all applications, including streaming video and support for about 1,400 computers. Kalis is satisfied with the performance of the Web client, but more people need to test it.

"We have to do some more testing and get some more groups involved and take a look at what kind of performance we're going to get," he says.

Don't Touch Office
Not all users are eager to replace their existing Office suites with Office Web Apps. One IT pro with the County of Albemarle in Charlottesville, Va., is a skeptic. The county's systems analysts put Office Web Apps through its paces and gave it a thumbs-down. "They said, 'no one's going to use this,'" says Mike Culp, Albemarle's Information Technology director. "If you were to just go out there straight and say, 'look, I'm taking away Office 2007 and you have to use Office Web Apps from now on,' you'd have a revolt. People are so used to the thick client; we've been trained to have all those tools and the Ribbon. People don't like change. I think that would especially be true for our Excel users. People have gotten used to using the advanced features that the Web application doesn't have."


[Click on image for larger view.]
Figure 1. Lync Online. An IM window allows users to see who's online in their network and invite them into a conference.

Chad Mosman, an MVP and principal consultant with MessageOps, has been testing Office 365 for six months and believes it will bring the suite to businesses that otherwise couldn't afford to use it.

"These smaller organizations suddenly have the same technology that their larger competitors might have, and they're getting not only the technology but the failover capabilities that were just previously outside their budgets," Mosman says. "With Office 365, it's well within reach."

The plan for small businesses, priced at $6 per user per month, has its limits. It will only support workgroups of up to 50 people and it doesn't include the Office software package, though it does work with it if you already have a license for the 2007 or 2010 editions.

Microsoft believes smaller organizations will be the early adopters of Office 365. "I think small and medium businesses will be quicker to adopt Office 365 because they don't have a lot of existing IT investment they have to move," says Microsoft's Rizzo, noting 70 percent of those who participated in the first beta were small businesses.

"I think a lot of people are going to put their toe in the water and run some pilot projects and run maybe 10, 20 or 50 users and see how it works," says Michael Osterman of Osterman Research Inc.

The plan that maps to the current BPOS plan, called E1, will cost $10 a month per user and will suit those that already have Office or don't need it. It will also be required for organizations with more than 50 people.

For many organizations that already have the Office client (versions 2007 or 2010), the less-expensive plans will likely prevail. "We have Office 2010 on most of our client computers right now," says Kent Degruyter, a systems administrator for the Albuquerque Bernalillo County Water Utility Authority (ABCWUA).

IT Infrastructure Alternative
Degruyter has been testing Office 365 because ABCWUA is in the process of spinning off from the City of Albuquerque to provide water to neighboring communities. As such, it will no longer receive services from the city, meaning it has to come up with its own IT infrastructure. ABCWUA decided from the outset that it didn't want to buy and administer its own Exchange and SharePoint servers.

"We don't want to babysit servers, keeping them updated and creating a failover structure physically and data-wise," Degruyter says. "When this came across our desk, it fit our needs. It solved a lot of problems that were associated with moving things over to our side of things."

Support for documents in SharePoint Online is a popular feature. Though he hasn't moved a lot of files into SharePoint yet, Degruyter likes the way it works.

"We didn't have any kind of speed issues," Degruyter explains. "We're going to be revamping our whole site collections and the whole SharePoint side of things as we move all the content over to Office 365, but everything we use so far we're pretty happy with. In fact, we like it better, because right now we're running on SharePoint 2003 and this will be a 2010 environment."

SharePoint will be used primarily for document management. Degruyter sees employing a more organized approach to document management as the agency moves to the new system.

"As we move things over to Office 365, we're going to try to really organize things and take advantage of site collections the way they're meant to be used," he says. "We just had one big melting pot for a lot of our documents, and now we're going to divvy things up into site collections and really leverage how SharePoint should be used using security and permissions and all that stuff."

Collaboration via SharePoint
SharePoint in Office 365 plays a big role in the editing process for David Kroenke, who writes textbooks for Pearson Education Inc.

"We've got all these chapters, all these figures and so forth, and there's four or five different versions of each one. So it's easy for the versions to get lost," Kroenke says. "The problem is, you never know if you're looking at the latest version. So what we do is we store all of our documents in SharePoint libraries; then, SharePoint does all the tracking and versioning for us. That's a huge win for us."

Another popular new feature is offline access to SharePoint. "I like the fact that SharePoint 2010 allows you to sync an offline copy of a site to your computer," says Jonathan Weisglass, founder of Summit Change Management LLC, who's been testing Office 365.

Weisglass also likes the fact that SharePoint in Office 365 can create Web sites. "SharePoint Designer 2010 is available for download and installation directly from SharePoint Online, allowing power users a chance to customize their site," he says.

"[I'm] glad to see Microsoft maturing in the document management space with Document Center in SharePoint," he adds. "It's great to have documents stored in a secure central repository, with collaboration features built in and an easy-to-use permission system."

Culp, of the County of Albemarle, also likes the features in SharePoint Online, but feels it will be necessary to have a SharePoint Server in-house as well. "With SharePoint, if you're using it for anything advanced or you're trying to build it up as an application-development platform, which we're trying to do, it's probably best to keep it internally," Culp says.

Managing E-Mail
One of the compelling reasons for many shops to move to Office 365 will be to have Microsoft take control of Exchange. Many shops have aging Exchange servers, perhaps versions 2003 or earlier, and they don't have capital budgets to upgrade, or they may be tired of running their own systems. For smaller shops, they may be relying on a low-end e-mail service and want the capabilities Exchange brings, but could never justify bringing in their own servers.

"This is a way for people who can't afford a full-time systems administrator and all the servers that are required to finally get on board using full Microsoft Exchange capabilities," says Weisglass. "Before, they were using whatever their ISP provided for Web mail. They were using the desktop for a lot of the documents not shared. They weren't using shared calendars. They might have had one shared folder in a desktop that was acting as a server somewhere. That's quite prevalent."

Larger organizations may have problems turning over their e-mail to Microsoft or any third-party hosting provider. They may have compliance or governance issues that require that sensitive data stay on-premises. That's a particular issue in industries such as financial services and health care.

Organizations can also employ a hybrid model, where employees who don't deal with sensitive data can be moved to Office 365 and others can remain on in-house Exchange servers. Mosman believes this will be a popular approach. He points out that Office 365 is more conducive to that than BPOS is.

"With BPOS, there was this idea that you could house some of the users in BPOS and have some of the users on-premises," Mosman says. "And that really didn't work all that well."

While basic e-mail worked, features like sharing calendars and message tracking did not; fortunately, those features do work in Office 365. "That rich coexistence is more viable and appealing than it was in the previous version," Mosman says. One catch if you're going to run a hybrid environment of Office 365 and Exchange is you must have the 2010 version.

Kalis, of the School District of Onalaska, has been testing Office 365 for several months, and while he sees compelling reasons to move to it, he has some reservations about ceding control of e-mail.

Currently, the district has an in-house system provided by Kerio Technologies Inc., and while Kalis likes the idea of Microsoft hosting it, there are some questions he needs resolved. E-mail retention is required for 12 years, so if any information regarding a student needs to be pulled up, it's available.

"We have certain guidelines we have to follow, so we like the idea of having them in-house. It's just that it's hard to let go of that," he says. "But if we have any way of archiving back down to storage, that would be acceptable. "

For its part, Microsoft offers 25GB of storage per e-mail account. Additional capacity can be purchased for $2.50 per gigabyte per month. Archiving services are also available.

Federating Active Directory
User administration is greatly improved in Office 365. One key example, Mosman points out, is support for federation in Active Directory. With BPOS, users were prompted to log in to Active Directory and Exchange Online. With Office 365, you have single sign-on.

"That's a big improvement that users only have to remember one password," he says. "The downside is there's a dependency on Active Directory being available to authenticate the users."

By going with Office 365, water authority ABCWUA may not need any Exchange or SharePoint servers on-premises, but it will have servers for other apps -- including access control -- according to Degruyter. Active Directory on-site will provide for authentication into various apps running on the servers, but also provide access to Office 365. The plan is to manage all the user IDs of those employees moving over from the city to the new agency and duplicate them into Active Directory.

"Basically the IDs that identify all the objects in Active Directory with the city, we're just going to duplicate them, take them off the city's [Active Directory] and migrate exact copies of them," Degruyter says. "Then you do a directory sync; you sync up your Active Directory with them, and it creates a mirrored cloud directory in the cloud."

He points out that, with Office 365, you don't have to have Active Directory on-premises, but, "we already have it and will leverage it to access internal applications."

Underneath the Admin Console
BPOS users will appreciate a much-improved administration console with Office 365. With BPOS, you had to flip between different consoles for SharePoint, Exchange and other functions, says Eligeo IT's Major.

"The one thing that jumped out at me as soon as we got onto Office 365 is you've got one console to really run everything -- it's more unified and the interface is much cleaner," Major says. "As far as configuration and setting it up, creating users is kind of a breeze, too. The overall experience seems easy."

Summit Change Management's Weisglass says there's an easy-to-follow electronic checklist that takes you through the initial setup of e-mail server settings, Lync and desktop Office 2007/2010 integration.

"DNS changes that need to be made at your domain host are clearly explained, and were successfully completed in very little time," Weisglass says. "Although Outlook 2010 requires a setup outside of the Office 365 wizard, the Outlook wizard automatically configured all of the technical admin settings after simply manually entering the user e-mail address and Office 365 password."

County of Albemarle's Culp likes the fact that he can select licensing options from the admin console based on what different users require. "The other great thing about the tool is it gives you the flexibility to mix and match how you want to roll things out, as well as have temporary deployments that you can then stand down quickly," Culp says.

Lync Integration
Another key feature of Office 365 is Lync Online, which provides an instant messaging client and access to PC-based screen conferences. Users will also be able to make PC-to-PC phone calls with the small business plan and multipoint voice calls with the enterprise plan, though the voice and video features will come later this year.

Microsoft is not saying how it may potentially integrate Skype, the voice calling giant it agreed to acquire in May for $8.5 billion. But Lync is omnipresent in the entire Office 365 stack, offering presence indicators in SharePoint and Outlook, as well as in Office apps.

"One of the things that we're hearing from customers is they're pleasantly surprised at the level of integration we have between all the products and the ability to bring it all together," Microsoft's Rizzo says.

For example, Lync is tied to SharePoint, where you can be browsing a SharePoint site and see the presence card, and IM a person directly from your SharePoint site. And there's Outlook integration with Lync, where you can quickly go and create a new online meeting right from inside the Outlook client with someone from the address book.

ABCWUA's Degruyter says Lync will be useful for employees to set up online conferences. "We have plenty of meetings around here. For people to be able to meet but not necessarily be in the same physical place, that's definitely going to make life easier in certain circumstances," he says.

A big fan of the Lync integration is Pearson editor Kroenke, who has been testing Lync Online to communicate with his team of editors. The integration of e-mail, SharePoint and Lync is changing the way editors at Pearson edit textbooks.

"The components by themselves are fine; they're great, actually, but what makes it really powerful is their slick integration. I can take a task list that's in SharePoint and pop it up in Outlook. It's completely changed how we do work," says Kroenke, who is also author of the book "Office 365 in Business" (Wiley, 2011), due out this month.

Now he and his co-editors can index and share documents and conference if they want to go over material being edited. "We're talking to each other, and there's a whiteboard. We're all typing on the whiteboard, we can draw on it, we can put art on it, whatever," he says.

Mobile Access
People are connecting their mobile devices to Office 365, and not just Windows Phone 7 devices but also BlackBerry devices, Android-based devices and iPhones.

"iPhone setup is completely manual, but the instructions on the Office 365 mobile setup site are very easy to find and follow, and the setup was completed successfully in less than one minute," Weisglass says.

Research In Motion Ltd., maker of the BlackBerry, will offer a hosted version of its BlackBerry Enterprise Server later this year.


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Figure 2. User Management. IT can provision users by establishing roles and setting permissions.

Buy vs. Rent
If you consider the cost of the Office client versus subscribing to it on a monthly basis, the question is: Do you shell out a few hundred bucks for Office licenses, or do you pay the monthly fee? If you consider that the E3 plan that comes with a license for Microsoft Office Professional is $24 a month and the E1 plan with Exchange online is $10 a month, that's a $14 premium for Office, totaling $168 per year.

While some say that's good for organizations that have floating headcounts or those who want to move the cost from capital budgets to operational expenditures, others say that

Microsoft's price can be steep over the lifespan of the product.

"The costs could outweigh the costs of continuing to maintain everything in-house," says Kenneth Bucci, a network administrator and technical support specialist at Synectics Group Inc., based in Allentown, Pa.

That may be true for some, but for others, Microsoft is betting that the future of Office will be in the cloud.

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