Executive Summary

Contributing Analysts: Matt Rosoff, Rob Helm, Don Retallack

The Microsoft Online Services offer hosted messaging, collaboration and other services like those offered by on-premises Microsoft server applications. Among the services are Microsoft-hosted services based on Exchange Server, SharePoint Server, and Communications Server (Lync Server), as well as the Live Meeting conferencing service. These services are available in various tiers, each with different levels of functionality, and can be purchased separately or in service plans, including the Business Productivity Online Suite (BPOS). Office 365, a set of new service plans expected in mid-2011, will replace the BPOS and update the services to the most recent versions of the Microsoft server products. Some Office 365 plans will also include subscription-based licensing for the Office Web Apps and Office Professional Plus desktop software.

Microsoft Online Services allow customers to avoid the cost of installing and administering on-premises servers, and to receive upgrades without having to buy and install new versions of the software. By including Office Professional Plus, Office 365 will also enable organizations to cover their main desktop application needs in a single subscription. However, customers will probably find themselves paying more annually to Microsoft with Microsoft Online Services than they pay for equivalent on-premises licenses, and subscriptions must be maintained to continue receiving service—ongoing payments that need to be weighed against savings from reduced personnel and hardware costs. Further, Microsoft Online Services today do not always offer all of the features of the corresponding on-premises software. Finally, using a hosted service has important implications for availability, data security and privacy, and compatibility.