Microsoft Office 365 gains for Cloud-based application
Many large businesses are evenly split in their use of cloud office productivity services from Microsoft Corp.MSFT +0.58% and Google Inc.GOOGL -0.15% While Google Apps is more popular than Microsoft Office 365 among smaller businesses, it’s a dead heat among companies with more than 1,000 employees, according to a new report on cloud adoption. Some see this as a sign that Office 365 is catching up to Google Apps in the enterprise and may soon start to surpass it.
Over the last year, Microsoft has begun giving corporations incentives to switch to the exclusively cloud-based Office 365 including features available only with the cloud service. “We’re starting to see signs that Microsoft Corp. is putting priority on cloud only,” said Tom Austin, vice president of Gartner Research Inc. Two years from now, Mr. Austin says he expects that Microsoft will significantly outpace Google in sales of cloud services to enterprises.
TE Connectivity Ltd., which has about 90,000 employees, began to work with Microsoft to move its email system to the cloud in mid-2013, said Joe Eckroth, the company’s senior vice president and chief information officer, in an email. TE Connectivity makes products for electronic connections in various industries such as automotive and energy. “While cost effectiveness is certainly a benefit, the dominant benefit is that our TE Information Services can go from a fixed cost environment today to a variable cost environment in the future,” said Mr. Eckroth.
Since January of 2013, Microsoft has released over 100 new feature-level updates in Office 365. “Many of those are cloud-first and they get rolled into service packs later,” said a Microsoft spokesperson. Other new features such as Oslo and Office Graph, introduced in March 2014, are only available on Office 365. Also, companies will need to use Office 365 if they want employees to be able to create and edit Office documents on their Apple Inc.AAPL +1.48% iPads. Microsoft, in a March blog post, said that it can deliver more value to customers through the cloud but will help companies get there in a pace and configuration that works for them.
Google, which launched the business version of Google Apps in 2007, had a head start on Microsoft by several years. Today, about 16.3% of companies overall use Google Apps, compared to the 7.7% of companies that use Office 365, according to a report released Tuesday by cloud security firm Bitglass. The company’s data analysis team built a mechanism to lookup the mail server of record for a source list of about 81,000 public and private companies. A Bitglass spokesperson said that data revealed whether a company was using Google Apps, Office 365 or another provider. Google did not respond to a request for comment.
Last year, Whirlpool CIO Michael Heim told CIO Journal that the company signed a five-year contract for Google Apps that covers 30,000 employees. The company wanted employees to use the same apps they favor in their personal lives. “We’re trying to shift the whole culture to be consumer-focused,” Mr. Heim said at the time. Whirlpool had previously used IBM Notes.
Google’s lead disappeared with larger companies, though. About 17.6% of companies with more than 1,000 employees use cloud-based email, split almost evenly between the Google and Microsoft. The Bitglass report said 612 companies in that category use Office 365 while 610 use Google Apps.
“The data definitely says to us that Office 365 is gaining on Google Apps in the larger companies,” Bitglass CEO Nat Kausik told CIO Journal.
And Microsoft under new CEO Satya Nadella stands to gain more ground in the years ahead. Earlier, Microsoft corporate vice president Adam Pisoni told CIO Journal that Microsoft executives are now encouraged to promote user engagement over product sales, and to take on smaller development projects over the large-scale projects associated with packaged software’s longer lifecyle.
The total enterprise market for Microsoft Office is about 670 million seats, mostly on premises, said Gartner’s Mr. Austin. With established relationships at these companies, many market watchers expect Microsoft to have an advantage over Google when it comes to shifting corporate customers to the cloud. While Gartner expects Microsoft to possess the sales lead two years from now, Mr. Austin says he expects Google to still capture 25% to 33% of sales at that time, in a significant blow to Microsoft.