What Does SharePoint Online's Growth Mean?

Growth of Azure once again was the center of attention following Microsoft's latest quarterly earnings report last week. But the company also gave a strong nod to continued expansion of its Office 365 business, buoyed by the news that Office 365 revenues for the first time surpassed sales of licenses of the traditional suite. Another important stat worth noting was that SharePoint Online usage nearly doubled last quarter over the same period last year.

CEO Satya Nadella shared that data point during the company's investor conference call last week to discuss its results for Q4 FY 2017. Although Nadella alluded to SharePoint Online's growth in passing, and without further elaboration, it gives some indication that the company's goal to move more SharePoint on-premises users to Office 365 is accelerating. To what extent the doubling of usage is meaningful depends on how many organizations are now using it, which the company hasn't disclosed. Various reports have suggested SharePoint Online usage still represents a small percentage of the overall SharePoint user base that either continues to run SharePoint Server on-premises or through hosting or cloud services.

In his prepared remarks, Nadella spoke of Office 365's expansion both in terms of subscriber growth and the depth of premium services used by commercial customers.  "Customers are moving beyond core workloads to adopt higher value workloads," Nadella said. "For example, we've seen a significant increase in SharePoint usage, which nearly doubled year-over-year." Does this signify a turning point for SharePoint Online?

During the Q&A portion of the call, financial analyst Raimo Lenschow of Barclays asked about its competitive edge in the context of the Office 365 Premium packages such as E5. "There's a lot more in the Office 365 adoption cycle beyond Exchange and e-mail," Nadella responded. Indeed, the impetus for many organizations to move to Office 365 is to get out of the business of deploying and managing Exchange Servers on premises, a common practice for more than two decades.

But moving to SharePoint Online hasn't been a priority for many organizations, especially those that have built custom server-side applications that aren't portable to Office 365. The release of the SharePoint Framework and recent extensions, along with new tools such as Microsoft Flow, Power Apps and Microsoft Forms are helping to ease that transition. Growth of the new Microsoft Teams also could portend increased usage of SharePoint Online.

But as the recent research conducted earlier this year by graduate students at the Marriott School of Management at Brigham Young University, spearheaded by Christian Buckley's CollabTalk, confirmed, more than half of SharePoint administrators, developers and decisionmakers surveyed have cloud-based implementations of SharePoint but don't have plans to transition entirely to the online version. (Redmond magazine was a media sponsor of the survey, available for download here).

Microsoft corporate VP Jeff Teper, who leads the company's SharePoint, OneDrive and Office, welcomed the Nadella mention in a tweet saying: "One of first highlights from Satya in today's earning's call – near 2x YoY growth in #SharePoint Online usage."

Indeed, that's a sign of growth. While Office’s commercial revenue saw a $277 million or a 5% year-over-year increase for the quarter, Microsoft said the growth was driven by a 43% increase in Office 365 commercial revenues. The overall 5% growth in commercial Office revenues, which totaled $5.5 billion, were offset by the shift to Office 365 from traditional licenses, according to Microsoft. But to what extent SharePoint Online growth has contributed and, in its own right, is accelerating is hard to determine. While Microsoft said that there are now 27 million consumer Office 365 subscribers, the company didn't share the number of commercial Office 365 subscriptions. Nadella had said back in April during the company's Q3 FY2017 earnings call that there are more than 100 million commercial Office 365 subscribers.

As the aforementioned survey revealed, while 32 percent of organizations of all sizes reported that they have hybrid SharePoint deployments, nearly half, or 49 percent, have hybrid server licenses, 35 percent have on-premises licenses and the remaining 17 percent use SharePoint Online. It will be telling what future surveys show with regard to SharePoint Online usage.

It's clear, and certainly not a surprise, that SharePoint Online is growing. The fact that usage has doubled year-over-year validates that point. But it's difficult to draw any solid conclusions as to whether the near-doubling of SharePoint Online usage last quarter points to acceleration or just incremental growth.

Is your organization moving more of its SharePoint workloads to Office 365?

Posted by Jeffrey Schwartz on 07/24/2017 at 6:32 AM