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Microsoft's Office 365 to take on Google Apps in cloud software race

June 28, 2011 | 12:53 pm

Ballmer365

Microsoft Corp., the 800-pound gorilla of the software world, is hoping it can lift itself into the cloud.

In announcing the general release of Office 365, the online version of its ubiquitous Microsoft Office suite that includes Word, Excel and PowerPoint, the Redmond, Wash., software giant is looking to catch up to rival Google Inc. in the race to move business software off local computers and into the “cloud” of online data centers.

Cloud proponents say companies can cut technology costs by getting rid of their own servers -- which are expensive and require frequent maintenance and security updates -- in order to allow technology firms like Microsoft and Google to handle the hard work of supplying business' computing needs.

Starting at a monthly fee of $6 per user for the most basic version, Office 365 will allow businesses to store and edit documents online, and communicate via instant message or video chat as they work on projects together, an element Microsoft said would allow workers to get more done.

"What happens when Microsoft Office meets the cloud?" said Chief Executive Steve Ballmer at a presentation Tuesday.  "Collaboration happens in addition to productivity, anywhere for any business of any size."

Though Microsoft has for years had a cloud element to its Office suite, the company has struggled to catch up to Google in the online software race.  The search giant says its Google Apps software is used by 3 million businesses and 30 million people around the world.

Still, that number is a small fraction of the 1 billion global users Microsoft says its has for its traditional Office suite, which for years has been its best-selling product.  In 2010, Microsoft's Business Division, which makes Office, was responsible for 30% of the company's $64 billion in annual revenue. 

As companies increasingly buy into the advantages of the cloud, an array of high-profile companies including Google, Amazon and IBM are competing to be the provider of choice. But with a huge existing customer base, Microsoft is looking convince its users that moving to the cloud will be easier and less risky if they stick with the familiar Microsoft Office.

"The reality is that Microsoft already has these customers, and should easily be able to retain them," said Brad Reback, an analyst at Oppenheimer and Co.  "Businesses in general, especially with something as critical as email, are loathe to switch companies like that."

Google quickly shot back, however, posting a list of reasons it believes Microsoft's product is inferior.

"Upgrading platforms and adding features results in systems that are increasingly difficult to manage and complex to use," the company wrote in a blog post.  "At times like these, it's worth considering a clean-slate: an approach based on entirely modern technologies, designed for today’s world."

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-- David Sarno

Image: Microsoft CEO Steve Ballmer speaks at the launch of the company's Microsoft 365 cloud service in New York. Credit: Ray Stubblebine / Reuters

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