In-Depth

26 Questions with Microsoft's Tom Rizzo on Office 365, Google and More

In this Q&A, Microsoft Senior Director of Online Services Tom Rizzo talks up Redmond's hybrid cloud offerings and its desktop/server solutions, and shrugs off any threat from Google Inc.

How's the Office 365 beta going?
Over 2,000 organizations sign up every day for the beta, it is a limited beta. We don't provision them immediately as we sign them up, it is staged over time. We do offer different editions through the beta, so we have Office 365 for Small Business and we also have Office 365 for Enterprise. When you sign up for the beta you can decide which editions you want; you can try multiple editions. Those organizations can provision multiple users typically 10 or 15 or 20 users to try all the different services inside of the actual beta. We continue to have good momentum on the BPOS side of the house.

Does BPOS go away?
Over time. We are giving customers and partners a year transition time. We won't immediately flip the bit on them where they have to start using the new stuff. They can plan out their transitions to the new service.

What happens after the transition?
They have to move to the new service, we can't run both forever but unlike the competitors in this space, we don’t require you immediately to upgrade to the new stuff. You have a year to figure out your plan, train your users and then upgrade over time. Once we get the last person off and transitioned, we will eventually shut down the BPOS service.

What types of migrations will customers and partners have to go through?
It will depend on which pieces of the product set that you're using, whether you're using email, like in Exchange, or whether you're using SharePoint or whether you're using OCS [Office Communications Server] or Live Meeting or that sort of stuff. It also depends on whether you're all online or you've got a hybrid sort of solution that you're running where you've got some online and some on-premises. It is an upgrade. It will be pretty seamless for customers and partners.

Obviously if you did a lot of customization on SharePoint and those sorts of things, you'll want to test that. With email it's pretty straightforward. If you did a lot of customization on SharePoint where you built custom sites and maybe uploaded some code and that sort of thing, you definitely will want to test that before you move it over but we provide guidance and tools on helping you make that transition.

What kind of feedback have you gotten so far from customers?
There's lots of excitement. Obviously the 2010 product set is interesting for folks just from the value of the 2010 new feature set. Some of the things that we hear that excites both customers and partners is obviously a bunch of new Exchange features around productivity and email. Also federation of calendaring has been one popular feature where you can take your calendaring system and federate it out to other organizations, so you can share things like free-busy, share calendar details and that sort of stuff. Usually scheduling between companies is very hard. Now with the federation it's easy. In terms of SharePoint there's a whole new set of functionality around collaboration and content management. I would say one of the primary things that people are excited about in SharePoint is the social networking features now coming to Office 365. So you get things like My Sites you get things like Activity Feeds inside of your organization, those sorts of things, so that you can have a very rich sort of Facebook for the enterprise inside of your organization.

The other piece people are excited about is Office Web Apps, so being able to run Office in the cloud through the Word Web app, Excel, PowerPoint, OneNote – that has generated a lot of interest. People have been kicking the tires on the consumer side through things like SkyDrive. With Office 365 we bring the Web apps into the cloud for the commercial side of the house.

What has partner reaction looked like?
When it comes to partners, obviously we have a bunch of partner programs that we're onboarding. There are a couple of things that partners have been very interested in. We're enhancing the partner administration console to make it easier for partners to administer on behalf of their users. So today, in BPOS we allow partners to administer on behalf of their customers. We will give even more granular permissions for partners in this space as part of Office 365. We also have our BPOS Advisor and BPOS Syndication partner programs.

Can you explain those?
With BPOS Advisor, partners don't have to commit a ton to get into the Advisor program. Think of a partner who works with medium-sized businesses who want to not have to worry about installing servers or remote administration. With the Advisor program, you have to commit to a certain number of seats and sales, it's not a hard commitment. What they do is they become the partner of record for the customer and we actually give back some of the subscription that they paid to us to the partner. So it's 18 percent the first year and it's 6 percent every year after that. The Syndication program is higher end. In the Advisor program Microsoft continues to own the billing relationship. In the Syndication program, the partner owns the customer relationship. So they get more interaction with their customers and can sell more value added services on top.

Are you considering making changes to the Advisor program so partners can bill their own customers?
Well they could move up to the Syndication program if they want to own the billing relationship. We also do allow folks to resell our technologies. It depends on what type of partner that they are. Obviously all partners want to control the relationship as much as they can but if customers come and sign up through our standard sort of portal and do direct buying through Microsoft and then add a partner on record, Microsoft will continue to own that billing relationship but partners have lots of opportunities. One of the big opportunities we see is obviously with SharePoint, being able to do value added services on top of SharePoint. The research we did, partners can make $10 to $12 of additional services on every dollar of SharePoint that we sell.

That said, do you see any changes to the Advisor program that will let partners bill customers directly? We are obviously open to feedback. We just announced the Advisor and Syndication programs, just a couple of months ago, so no changes are planned. The other thing too about our all up cloud programs is it's not just Office 365 or BPOS, a bunch of the programs also include Azure and also Dynamics CRM Online. We have over 16,000 BPOS partners today and we're signing up new ones all the time. [Editor's Note: Microsoft Worldwide Partner Group Corporate Vice President Jon Roskill recently told partners that senior executives at Microsoft are holding meetings about possible changes. See the story here.]

What percentage of those would fall under the Advisor program?
I would say probably the majority would fall under Advisor since it’s a lower bar to enter. The Syndication partners are probably your bigger partners in this space. We don’t publish that out.

Will Office 365 users have to upgrade their desktop Office software?
It depends on what you buy, because we do include Office as a subscription in some of the licenses for Office 365 so you will get the rights to Office 2010 on the desktop. We do support back to Office 2007 so you don’t have to upgrade.

Is there any plug-in or connector?
We do have one, making it easier for administration and connecting to the service, we do have a plug-in on the desktop that does a couple of things: number one is it allows single sign-on into our cloud service so that the end user doesn't have to enter in a user name and password, we automatically sign them into the service so when they open up Word, Excel, PowerPoint or Outlook, there's no sort of login. The other thing it does is it autoconfigures all of the Office Apps to connect to the service. So for example Outlook will be automatically configured for the end user to connect to Microsoft Online so they don't have to go in and type a server name or try and discover servers, it will just automatically do that.

As for the Office applications themselves, they are file-open-save. They will be [able to] write to SharePoint Online, so again they don't have to remember it's mycompany.sharepointonline.onmicrosoft.com. It's just automatically an open and save dialog. It makes it easy for administration and also configuration of desktop clients to connect to servers. Then we do some stuff in the browser to make it easier to connect up through the browser.

What's your message to partners that are concerned about disintermediation that Office 365 could bring?
I don't think there's that sort of disintermediation because it allows the partner to go in and sell additional services on top without having to worry about infrastructure deployment, and upgrade and maintenance and that sort of thing. It moves them away from some of the things they may have had to do in the past in terms of patching and that sort of stuff. Still they have to do some management on the desktop and those sorts of things, but on the server infrastructure they can move now to being a higher value add partner where there may be more margin for them on the services that they can provide. I think that will engrain them more in the customer than maybe some of the other services that they may have provided in the past. We think a lot of partners will move toward more advisory services and application customization services than maybe that sort of infrastructure services that they've provided before. That will make them hopefully more profitable partners.

How is Lync being offered in Office 365?
It will have IM, presence, Web conferencing all those sorts of things we'll provide through the Office 365 capabilities. And it's all integrated together. So if you're in Word, we will provide things like co-authoring, so you can be in Word, and be able to see other people come into that same Word document and be able to co-author with them. But the other thing too is with the Lync technologies, you'll be able to see the IM and presence of that person and be able to send IMs with them while you are co-authoring inside of Word. And if you want to start a Web conference, right from within the Office experience, it will be a seamlessly integrated IM, presence and word processing.

So what's your take on Google's push into the Office market?
They've been in the cloud productivity space for the last four years and the results haven't been stellar. Most of their customers sit on the free version. They're not paying customers into the Google service. We were just talking to the Gartner guys, Google in four years has less than 1 percent of the enterprise e-mail market, and you could argue Gmail has been their longest product in this space. Sitting at less than 1 percent is not a good place to be after all the hard push they had. There's a couple of reasons for it. They're trying to shoehorn consumer products into the enterprise space. That's like us trying to take things like Hotmail and Skydrive and say "it's enterprise ready, customers should start using it for business." Those weren't built for business to begin with -- they were built with the consumer in mind.

The other thing we hear from customers and partners is Google is not good at providing roadmap support. All the enterprise class things that businesses need and the partners need to be able to service their businesses, Google has no roadmap. They kill products like Wave, they cut off support so customers are left kind of stranded if they've invested in anything that never comes out of beta or comes out of beta and then is killed. I think Google has a lot of learning and growing up to do in the enterprise, and I think you can also see that through the partner ecosystem, they just don't have a lot of commercial partners building services on top of their products.

That said they said they have 2,000 partners, which has doubled in the past year...
Two thousand partners in four years. We have to peel back how many of those are partners in name verses partners in practice. How many of them are actually doing business on the Google platform and actually winning customers there verses signed up for the Google partner program, which is a very low bar to sign up for. I think it's an inflated number in terms of the real partners doing real business on the Google platform.

What's your reaction to the Cloud Connect tool they released that links Office to Google Docs?
Yeah, the DocVerse technology. I think it's a little bit of them waving the white flag. When they first came out, they were very aggressive against Office, four years ago they said you can replace Office on the desktop and Google Apps is going to be that replacement. Then they quickly backed away from that and said, "maybe Google Apps isn't a replacement for Office, it will be a companion to Office," now they are building technology to try and connect it together. At the end of the day, with the Cloud Connect technology they are waving the white flag, that Office is winning on the desktop. I would say customers looking at that Cloud Connect definitely should look at Office connecting to our cloud services because it's Office in both places in terms of our Office Web Apps and Office on the desktop.

What is the relationship, if any between Office 365 and Windows Azure?
We are working really closely with the Azure team to make sure that Azure and Office 365 connect well together, because we realize that the partners, especially ISVs will want to build apps that run in Azure that they can sell to people running in Office 365. We want to make sure identity, security integration is all there so you can have the two solutions integrate plus we are investing a lot in Pinpoint, our marketplace, so it spans not only geographically everywhere but also spans Dynamics CRM, Azure, and Office 365 so a customer has one place to go look for partners whether they're services partners solution providers, or whether they are selling software through the marketplace.

What kind of apps will lend themselves to running on Azure from Office 365?
I think it's similar apps to those built and run on premises, so things that maybe extend with horizontal solutions There's a multitude of things that customers can do and partners can build and customers can buy through the cloud by building them on top of Azure. The great thing for the partner is Azure scales, so if they get a great app and people start buying then the partner doesn't' have to worry about scaling their own infrastructure.

To what extent are you seeing customers interested in extending Office apps onto Azure?
A lot of the Azure apps today are Web based because we don't have the Office 365 product out yet, and the BPOS product, while it integrates, there's still a bunch of work you have to do as a partner to integrate the two together. Office 365 will make it more seamless. Productivity applications are probably not the majority of the Azure apps but I think you will see that shift over time as we get Office 365 to the market.

What horizontal or vertical industry trends do you see in terms of customer interest in cloud computing solutions?
I would split it into two in terms of industries and workloads. The first workload that we see coming to the cloud is email and even Gartner predicts email will be the first to come to market. They said it will be 30 percent by 2015 and 50 percent 2018. So that is definitely the first workload to go and we are seeing that happening in spades. Next is team collaboration and document sharing where you may want to put up a document, share it with others in an extranet business-to-business portal. In terms of industries, we see small and medium business being the first to go to the cloud because they don't want to run IT infrastructure. Enterprises will be slower, or they'll have more hybrid solutions where they've got some stuff on premises, some stuff in the cloud.

What about specific verticals?
Manufacturing, is definitely one of them where you may have a set of what we call structured task workers or kiosk workers. For example a car company where you may have of 200,000 people, maybe 100,000 work on the shop floor where they don't need high-end productivity, they just need simple e-mail, simple calendaring and maybe access to a portal to access their HR information. Also financial services is another one looking heavily at the cloud, and from there healthcare. Obviously sensitive information stays on premises but they are moving other stuff into the cloud.

What's you take on how premises and cloud-based solutions will co-exist?
I think hybrid is around for awhile, especially in the enterprise. In SMB I think it goes faster where they move to an all cloud model. I think in the enterprise, I think on premises is not going anywhere, both in enterprise and large government. I think that presents opportunity to make that integration easier and to also have folks help us with the transition to the cloud over time. I think it also opens the opportunity for the Azure technologies where people can develop applications. And the Azure appliance as well, will allow people to move stuff into their private clouds. We hear a lot of conversation around private clouds. I would say one of the other differences between us and Google for sure is we don't require an IT ultimatum. You want to run stuff on prem? Great, we have an on-prem solution. Want to run stuff in the cloud? We have a cloud solution. You want to run both, we have that. Google is one size fits all across everywhere. It all has to be cloud-based.

When it comes to online services, how much goes through partners record verses direct?
We don't publish out those numbers. One of things I will say is when there is a partner of record, the deployment goes a lot better, than when there isn't a partner of record because partners are there to help the customers. We try to provide guidance for customers that do it on their own. The thing about moving to the cloud for partners is that the customer is always there too, so if they're having a bad experience, you can always interact more with the customers. One of the things we always tell our partners when moving to the cloud to is you have to make sure you're concerned about customer experience management more than ever before because a customer can cancel the subscription to us or the subscription to you the following month. It's not like they buy a license and you go talk to them two years later or three years later and renew that license. That's a very different model for some of our partners and we're trying to help them along in this transition.

Have you sorted out the training and certification requirements yet for Office 365?
We are working through that. We do have our Cloud Essentials and our Cloud Accelerate programs in place today. Cloud Essentials is effectively free to any partner that's part of the Microsoft Partner Network, and then you can move up to the more robust Cloud Accelerate which has more requirements of the partner and has more requirements of us, where we give you not only all the things we give you in Cloud Essentials, which is things like free BPOS for you to run as a partner, Azure and a bunch of other things. But also we give you training. Then if you move up to Cloud Accelerate we actually give you advisory hours from Microsoft so you can either bring us into a deal, and we can help you work through a deal, bring us into a deployment, we'll help you through the deployment. We also will engage you with our local subsidiaries, so if you're a partner based in Asia, we'll make sure that you are connected to our local subsidiaries to help with co-selling, co-marketing, those sorts of things. We'll definitely tell partners to go with Cloud Essentials first, and then move up to Cloud Accelerate if it makes sense for you.

Do you have any numbers on the beta?
We have 2,000 a day -- that's 2,000 organizations, that's not people because orgs have multiple people. That's signups, that's not provisioned, because it is a limited beta. It costs us money to provision lots of people. We still are taking signups. That does not mean the customer or partner will get in but we are definitely interested in getting the signup and bringing people online.

Do you anticipate closing it out?
Maybe. TBD, I would say. If we feel good about the coverage of testing, both on the small business side and enterprise side, we may close it out. But right now we are continuing to provision people on the beta.

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