by Shane O'Neill

Q&A: Inside Microsoft’s Cloud Model for Productivity Apps

Mar 15, 2010
Cloud ComputingMicrosoft OfficeOffice Suites

Corporate VP of Microsoft Online Services Ron Markezich discusses the joys and pitfalls of productivity apps in the cloud, how to mix your own data center with Microsoft's cloud model, and the rising tide of BPOS competitors. Hint: It's not just Google.

Enterprises of all shapes and sizes are catching on to the value of moving e-mail and other productivity apps to the cloud where they can be delivered and managed by vendors like Microsoft, Google or Cisco.

The major appeal of cloud is that it saves money, says Ron Markezich, Corporate VP of Microsoft Online Services.

But the benefits of moving apps out of your data center and into a cloud environment such as Microsoft’s BPOS (business productivity online suite) go deeper than cost cutting, says Markezich. A cloud environment can speed up workflow simply by allowing workers to access e-mail from any Internet connection. It can get top brass using wikis and blogging to improve communication at a company. And it can take the burden of managing servers off the IT department and free them up to work on more business critical projects.

Yet the cloud still has certain stigmas that have kept some CIOs from allowing any data to leave the data center.

In this interview with’s Shane O’Neill, Microsoft’s Markezich discusses the joys and potential pains of the cloud model for productivity apps.

How does the BPOS (business productivity online suite) work within an organization?

With BPOS, a company can choose to have Microsoft deliver SharePoint, Exchange, Office Communications Server and Live Meeting as an online service from a Microsoft data center, operated and delivered by Microsoft end to end. Customers continue to manage their own directory. We’ll have a replica of their directory in our data center so we can run authentication off that directory.

BPOS includes any upgrades in hardware and software and we execute quarterly releases on our online services. Customers basically have a pipeline into our R&D investments with these services and can get the benefits much faster while saving money.

What are the price ranges for BPOS?

For the full suite, the list price is $10 per user per month for all four applications [Exchange, SharePoint, Office Communications Server and Live Meeting]. For e-mail only it’s $5 per user per month. If you already own the software, be it Exchange or SharePoint, you get a discount on those prices.

A lot of customers have parts of their workforce that don’t need the bells and whistles that the CEO or finance department needs. So we have an option called Deskless Worker Exchange Online that’s $2 per user per month. It’s the same platform and it still has a lot of the same features as Exchange Online but it’s a little scaled down. It’s a smaller mailbox; it’s browser only access.

For CIOs who move productivity tools to the cloud — whether it be a hybrid situation or they go all in — what are the deciding factors there? What finally convinces them?

The discussion usually starts and ends with saving money. But the real reasons are typically much bigger than that.

CIOs know they’ll save money, but they also want their users to go to a new level of productivity. They want them to connect to e-mail anywhere and collaborate in a secure way without worrying about the corporate network. They want users to always use the latest technology, and want IT to stop worrying about managing patches and servers and focus on areas that are unique to the business.

They also want to speed up getting new features such as voice and video, the integration of e-mail, chat and presence, and they want to connect with partners through social networking tools.

What are the factors that prevent CIOs from moving data to a cloud environment?

The biggest one is that some organizations feel like there is a loss of control with the cloud. It does change the way a company works.

One of our customers, [pharmaceutical company] GlaxoSmithKline, is a good example of a company that embraced that change. A new CEO came in and the CIO said we need to change the culture here, we need to get off Lotus Notes. They used BPOS to change the culture.

And it typically takes that mandate from senior management to get it done because it does change how IT people work. In a cloud environment it’s no longer about running and patching servers. And it’s also different than traditional outsourcing; outsourcers are just an extension of your IT department and will do anything you ask them to do, and just give you bill at the end of that request. BPOS is a standard service where every user in the company is run in the same way. This loss of control is one thing that will keep CIOs from moving.

Another factor is some companies have regulatory reasons why they can’t move to the cloud. This is more common in the public sector. In the UK, some government agencies have federal requirements that don’t fit well with the cloud, such as data has to stay in the UK, or must be operated by UK citizens.

What types of companies are more apt to keep productivity tools on-prem and which are the cloud candidates?

I used to think in terms of company size and industry, but really we have customers in every industry. I would say that those most likely to keep data in their own data centers are those in the public sector for the regulatory reasons I discussed.

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At the same time, some public sector customers are leaning toward the cloud. Royal Mail Group, the UK postal service, is now using BPOS. So it’s hard to say if there’s an on-premise industry and a cloud industry.

We have some giant pharmaceutical BPOS customers that are highly regulated such as GlaxoSmithKline and Novartis. We also have big financial and insurance industry customers, such as the UK’s largest insurance company Aviva, that are moving e-mail and other productivity apps to the cloud.

Conventional wisdom says cloud candidates would be small businesses that are unregulated , and yes we are certainly seeing that, but surprisingly we are seeing large enterprises in regulated industries too.

Security is the main concern and a large bank is not going to move to the cloud overnight. They’re going to send a security team to Redmond for days of briefings about our security model to make sure they are comfortable.

What’s the strategy out there for a mix of cloud and on-premise — also known as a hybrid environment?

In most cases, a company will choose a BPOS application and move all its users to that app. Often, they will choose SharePoint Online, Exchange Online or Office Communication Online. It’s a way to dip they’re toes in the water with one application and see how it goes.

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Hybrids are not typically done by keeping some users on Exchange server in a company’s data center and then putting some users on Exchange Online in a Microsoft data center. Hybrids are mostly done by application.

I think in the beginning the thinking goes ‘lets keep our CEO and executive team on Exchange or Notes in their data center and move all other employees to Exchange Online.’ But once they get comfortable they decide to move 100 percent their users to Exchange Online because the ROI is better.

What are the potential pitfalls when deploying Microsoft Online Services?

Security is the obvious concern, but by the time customers are ready to deploy, the security issues are over because they’ve done their due diligence.

As far as actual migration, there is a danger of going too slow. The faster you can migrate users the quicker you can get the savings and benefits. If you’re too conservative and move 100 or 200 users a night it just extends the whole project longer than is necessary.

There is also a temptation to train every user, which is a cultural thing. This makes more sense when going from Lotus Notes to Exchange Online, but when you’re moving from Exchange Server to Exchange Online, users are still using Outlook. It’s mostly the same to them.

The last deployment gotcha is to eliminate the old environment as fast as possible. You need a plan to eliminate your Notes apps and server and get everyone moved over. If you’ve moved to the cloud but you still have a Lotus Notes or old Exchange environment for hundreds of users you’re really not getting the full benefits of the cloud. The real cost savings come in eliminating old servers ands apps.

What are you hearing from enterprise customers about Google Apps and other low-cost alternatives to BPOS? What do you say to current Microsoft customers that are considering moving to an alternative?

There are a lot of new entrants in this space. You have Google and Zoho. VMware just bought Zimbra. You’re seeing Cisco get into this with their WebEx mail. And enterprise customers are testing all of it.

But there’s a difference between an architecture that was built for consumers and one that was built for businesses. Usually customers will figure that out pretty quickly. We have a platform that has a decade of R&D behind it to meet enterprise needs. It’ll take awhile for these new entrants to catch up to the capabilities in Exchange and SharePoint.

Also, what does the support look like in these cloud alternatives? We can have a Microsoft person at a customer site anywhere in the world if not in minutes then in hours.

We’ll also ask customers: are any of these new entrants really committed to online productivity services? Are they making investments in the enterprise for the long haul? It’s taken Microsoft 15 years to prove that we are committed to serving enterprises and now of course that is a very large part of our business.

Shane O’Neill is a senior writer at Follow him on Twitter at Follow everything from on Twitter at