The last few months have been a turning point for Microsoft, as Office 365 raced past Google Apps to become the top productivity suite in the enterprise market. It’s a major milestone for Office 365, which has trailed behind other cloud apps, and last year, only had half of Google’s market share in this space.
Just in the past quarter alone ending September 30, Office 365 revenue grew 70 percent. Overall, Microsoft marked the highest profit growth in 15 years, as annualized revenues from its cloud commercial services reached $8.2 billion during the quarter.
This meteoric rise is not too surprising, given that Microsoft has invested $15 billion in building its cloud infrastructure. Additionally, 80 percent of Fortune 500 companies are operating with Microsoft Cloud — with 25 percent of all Microsoft enterprise customers using Office 365. The pace of growth among consumers is just as brisk — three million consumers subscribed during the past quarter, for a total of 18.2 million.
Guest article by Sekhar Sarukkai, Co-founder and Chief Scientist at Skyhigh Networks
It’s obvious that the tech giant’s aggressive move to win in the cloud services market — buoyed by CEO Satya Nadella’s push — will continue. And while this growth is clearly a boon to a company that’s been struggling to keep its relevance in other areas — like mobile — the true winners are Microsoft’s customers.
Cost savings a major driver
The universal appeal of Office 365 is due, in part, to its scalability — both SMBs and enterprises can see cost savings over on-premise software.
For smaller businesses in particular, there’s a big advantage in eliminating the need for network infrastructure and servers, dedicated in-house IT staff, and backup systems, among other things.
There’s also a tax advantage, regardless of company size. Businesses typically prefer operational expenditures (anything having to do with daily operations) versus capital expenditures (typically involving fixed assets) because of how these expenses are deducted. The cloud model creates a pay-as-you-go line item that falls under operational costs.
According to Microsoft’s own estimate, the savings from migrating to Office 365 is between $511 and $839 per user, per year, based on factors such as licensing, deployment, and hardware costs. For a company that has hundreds or thousands of employees, the economic benefit adds up fast.
Easy updates and maintenance
To start with, running productivity software on premise takes quite a bit of an investment — the organization needs to pay for one or more servers, as well as up-front licensing fees and IT staff. And then there’s ongoing maintenance and troubleshooting.
For example, deploying company-wide software updates has always been a point of contention. Organizations had to choose between paying overtime hours on the weekends or disrupting scores of employees as each workstation received the latest Office update.
With the cloud version, users are always accessing the newest apps, and there’s no downtime. Office 365, essentially, comes complete with an IT department that takes care of updates, maintenance, data security concerns, and backup — all at no extra cost and without disrupting operations. At the same time, it frees up the in-house IT team to spend time on more meaningful and productive work.
Access anytime, anywhere
BYOD (Bring Your Own Device) has been a major trend for some time now. IDC expects that over the next five years, the mobile workforce in the U.S. will grow from 96.2 to 105.4 million, and account for 72 percent of the total workforce.
This mobility drives employees’ expectation to access their work from anywhere, at any time. Office 365 not only fulfills that mission, but also allows users a seamless transition to online versions of the familiar desktop tools, as well as uninterrupted access to all their documents.
The cloud’s “always-on” availability also facilitates flexibility in when, where, and how employees can do their work. Studies have shown that a flexible work environment increases worker happiness and boosts productivity as a result. Other benefits of flexible work environments include reduced absenteeism, better retention, and improved worker health, according to a report by the U.S. Council of Economic Advisers.
Another major benefit is ease of collaboration. One analysis, based on 23 million cloud users, found that the average organization uses SharePoint Online and OneDrive to collaborate with 72 business partners. Unlike email, cloud apps like Office 365 allow entire teams to work on the same document, in real-time. The cloud eliminates the cumbersome task of consolidating multiple versions of the same document and creates a much faster workflow. This ability to collaborate boosts production too.
A win-win for organizations
Given all these benefits, it’s not surprising we see that an overwhelming 87.2 percent of Fortune 500 companies have at least 100 Office 365 users. The vast majority of companies, however, have yet to adopt a cloud-only model as they migrate their users in stages. In fact, the actual adoption rate is at 6.8 percent.
As those companies implement their migration, Microsoft will continue to gain ground on its competitors. And there’s certainly plenty of potential, considering that Gartner forecasts a decrease in on-premise software use to 18 percent by 2017, down from 34 percent last year.
But to keep ahead of the curve, Microsoft will have to continue to innovate and uphold high customer satisfaction — which could only mean even more great news for consumers in the future.
For more information on this topic, check out the free Aberdeen research report, Making the Most of Your Resources With Cloud Applications.
Sekhar Sarukkai is a Co-founder and the Chief Scientist at Skyhigh Networks, driving the future of innovation and technology. He has more than 20 years of experience in enterprise networking, security, and cloud services development.