Office 365 Adoption

Very interesting statistic from Okta regarding adoption of Office 365 relative to other cloud services. This is for businesses.

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In particular;

  • Office 365 is used across companies of all sizes. Workday, Clorox, Seton Hall University and DocuSign – all very different organizations in terms of age, size and industry – connect their Okta tenants to Office 365.
  • Banking, food & beverage and manufacturing favor Office 365 over Google Apps.
  • Consulting and law firms, as well as general technology companies, are more divided with pretty even adoption of Office 365 and Google Apps.
  • Google Apps is the clear choice among advertising firms, educational institutions and software companies.

MS-Office in the Workplace

Just for the record.

I’m working with a company that made headlines in 2012 with the announcement that it will be moving close to a hundred thousand employees to Google Apps.

Guess what format they send stuff to me in now.

Pure MS-Word and MS-Excel.

It’s not even in .docx or .xlsx but in the classical .doc or .xls formats which Google Apps no longer supports.

I suppose that even as they moved to Google Apps, they kept MS-Office around to communicate with the outside world.

Making Office Dramatically Better: Bill Gates

In an interview with Erik Schatzker of Bloomberg TV, Bill Gates gave his idea of what Microsoft’s priorities should be;

Certainly, Microsoft should do as well or better, but of all the things Microsoft needs to do in terms of making people more productive in their work, helping them communicate in new ways. It’s a long list of opportunities Microsoft has to innovate, and taking Office and making it dramatically better would be really high on the list, that’s the kind of thing that I’m trying to make sure they move fast on. I’m very happy with what he’s doing. I see a new sense of energy. There’s a lot of opportunity there. Some things the company isn’t the leader on, and he sees he needs to change that.

So Bill Gates is prioritizing MS-Office.

Why?

Jan Dawson has been giving us quite a few good posts on Microsoft, and had this to say in his post on Techpinions.

In short, if Microsoft is to compete effectively on a third party basis, its services on competing platforms have to be so good they can overcome the price/business model disadvantage, the lack of integration, and its far smaller mobile device installed base. As of right now, Microsoft simply doesn’t seem to have any products or services that can do that successfully and this should be a key area of investment. In the meantime, it’s being successful largely with products it’s unable to monetize from most users, such as OneNote and Skype.

Jan’s discussion is that Microsoft can no longer rely on it’s own platform (Windows), but must now win by providing software and services for third party platforms. That is iOS and Android. Whereas both Apple and Google can and do provide software and services for free due to their different business models, Microsoft’s business necessitates that they charge for MS-Office. Hence MS-Office must be well worth the price.

I think Jan Dawson and Bill Gates are in complete agreement here.

Japan’s Largest University Switching to Microsoft Office 365 from Google Apps (Docs)

The largest university in Japan, Nihon University will provide “Office 365 Education” for all of its 100,000 students according to the Microsoft Japan website.

I’m still in the process of researching the details, but some things that have been mentioned that I find very interesting;

  1. Nihon University had been using “Google Apps Education Edition” since April, 2007.
  2. Reason 1: Faculty staff used Google Apps but student uptake was not good. Students preferred to use their own free mail accounts.
  3. Reason 2: Unfamiliarity with Google Apps was a reason for slow uptake. By providing the software that everybody is familiar with (Office), Nihon Univ. hopes that students will also use scheduling and address book features.
  4. Reason 3: Students were pirating MS-Office install disks. Office 365 will make that a non-issue. Nihon Univ. chose the A3 plan with Office 365 ProPlus, which means that faculty and students can install Office on 5 PCs per user.
  5. Annual price per faculty is 410 JPY, per student 230 JPY. This ends up being cheaper then when they were using “Google Apps Education Edition” because even when they were using Google, they still needed to buy significant installations of MS Office.

Although we still need more examples to see whether this is a trend or not, I sense strong beginnings.

Cloud is getting cheap

The most powerful allure of Google Apps is the price. For general consumers and for education, the price is free. This was possible because Google had a robust advertising model. By injecting ads in the web user interfaces, Google could justify the cost of providing the service for free.

Historically, Google was uniquely positioned to provide an office suite for free. Other companies could not do this profitably.

However, as technology improved and the hardware required for cloud services dropped in price, it became feasible for companies without a robust advertising model to provide free or very cheap cloud services. This can be witnessed in the recent announcement at Apple’s WWDC 2014. Apple announced that they would be providing CloudKit effectively for free.

We are now at the point that we don’t even need advertising anymore. It has become feasible to provide free or very cheap cloud office suites, even without advertising. Hence anybody can do it. Google no longer has a unique advantage in providing services for free.

Google Apps never became “good enough”

With the cost advantage of Google Apps eroding, the argument for choosing either Google Apps or Office 365 now rests on the benefits that each platform provides. This is something that Google Apps was never designed for.

Since its inception, Google Apps was designed as a simplified version of MS Office that justified its existence by being much cheaper. Although it had some unique collaboration features, it never evolved to become better than MS Office. It was always obvious that if it lost its cost advantage, it would lose out against MS Office.

Looking at the reasons why Office 365 was chosen over Google Apps, it’s very apparent that Office was still an application that both faculty and students needed to use from time to time. Google Apps had never become “good enough” on its own.

Microsoft is changing

Since the costs of providing cloud services had decreased, the only roadblock for Microsoft going aggressive with Office 365 was the possibility of cannibalization. Office 365 could potentially cannibalize sales of their standalone office suite.

A few thing have happened that might have changed their minds.

  1. Adobe has been very successful with their Adobe Creative Cloud.
  2. Microsoft’s new CEO is a cloud guy.

What are the trends?

These are the trends that I think we are beginning to see.

  1. Google’s strength in advertising will no longer be sufficient to maintain an advantage (based on cost) in the cloud. Cloud costs have gone so low that advertising is no longer necessary for a free/low-cost service. Subscription services are proving to be a good business model.
  2. With the price issue becoming less of a concern, competition in the cloud will focus more on features and usability. In established markets, one feature that will continue to be extremely important is compatibility with de-facto standards (both in file-formats and user interface).
  3. As the focus shifts to features and usability, native applications will maintain their advantage against web apps.

On the Future of MS-Office, or Actually How MS-Office Affects the Future

There’s was this interesting conversation on the future of MS-Office on Twitter, and Umang Jaipuria collected the tweets to make a very interesting read.

Matt Rosoff also wrote an informative article inspired by this discussion “Why Microsoft Office can’t be uprooted so easily”.

This is also something that I have been thinking about and I just want to add a few comments to clarify my thoughts.

Bendict Evans:

The future & importance of MS Office is a key to understanding a lot of the next few years. Often seems like a blind spot in the Valley

Bendict Evans:

Hence my original tweet: the way Office evolves or its use cases get reimagined is a big trend, which also affects tablets & PCs

This is a very important point which unfortunately seems to have been lost as the discussion turned into an MS-Office vs. Google Docs argument. What I think Ben Evans meant to say is that if MS-Office remains as important and relevant as it currently is, then the platforms that work well with it will be at a strong advantage.

I understand this to mean that what Microsoft chooses to do, and actually manages to implement with MS-Office, will strongly affect which platforms will win in the tablet market, and the extent to which laptops will be replaced by tablets.

Marc Andreessen

Plus Google Docs and its peers way better for online collaboration–automatic, seamless, all devices/OSs — new requirement.

Benedict Evans

Shared doc editing is a feature and not a universal core case. And isn’t a collaboration platform a better approach?

Here Marc Andreessen argues that the collaboration features of Google Docs are the core appeal. Benedict Evans on the other hand disagrees.

If I understand correctly, Benedict Evans views Google Docs as an inferior replacement for MS-Office whereas Marc Andreessen thinks that Google Docs is a collaboration platform more akin to a Wiki.

My opinion leans towards Benedict Evans. For one thing, the design of Google Docs simply resembles a folder with some Word, Excel or Powerpoint documents. Even the icon colors try to associate themselves with the color-coding for MS-Office; blue for a word processor, green for a spreadsheet, and orange for presentations. Inside the app, the user-interface strongly resembles pre-ribbon MS-Office interfaces. There are a couple of buttons for collaboration features, but that’s it. The design suggests that sharing is an addition to the core case (low-cost imitation of MS-Office) and not the other way around.

What this means is that Google Docs is probably targeted towards users who primarily want to edit a document.

Benedict Evans:

Excel is a platform. And an IDE

Benedict Evans:

Office is very feature rich but task-agnostic (Lawyers & admen use same apps). SAAS tends to be the other way around?

Chris Dixon:

yes, SaaS tends to be focused on jobs to be done. Part of is it “bottoms up” (division level) sales model.

Marc Andreessen

And it seems that because of that SAAS will end up being much bigger/diverse than we all thought 5-10 yrs ago.

There is good agreement here in what MS-Office is, and what the new SaaS products that Marc Andreessen and others foresee will replace it are.

Marc Andreessen appears to think that SaaS will diversify and evolve to the point where, for most custom solutions that can be imagined in Excel, there will be a SaaS solution for it. I find this hard to believe.

Whenever we adopt a SaaS solution, we are forced to adjust to it. There is very rarely a pre-configured product that fits what we need to do exactly. In addition to a learning curve, there is an adoption curve where we change our workflow to fit better with the fixed SaaS solution. What’s more troublesome is that we don’t really know before we embark on our learning, whether or not the fit will be good. Unless the application requires a lot of collaboration and simultaneous access, forgoing a SaaS and instead creating a simple solution in Excel is often by far the quickest and the most effective.

My view

Google Docs is an attempt to commoditize MS-Office. It imitated the design and functionality of MS-Office and is offered free-of-charge to maximize adoption. However, MS-Office is still very much the standard in corporate and professional environments.

Importantly, MS-Office is not just content-creation software. It is often used as viewing software. It is the equivalent of Adobe Illustrator, Adobe InDesign and Adobe Acrobat for the creator, but also the equivalent of Adobe Acrobat Viewer for the reader. The availability of MS-Office does not only affect the content-creation side, but is essential for the consumption side as well.

As Benedict Evans states, the evolution of MS-Office and how corporations use software will greatly affect tablets & PCs. This is a very strong card that Microsoft still holds, and which can sway the game to its favor. Its strength is very often underestimated.

There are a lot of unknowns and also technical obstacles.

Apple recently introduced new versions of its programs in the iWorks suite. The reviews were not pretty. In order to bring file-format and user-interface parity between the iOS versions and the Mac versions, many features of the Mac version were at least temporarily removed. Given that the PC versions of MS-Office have much more features than iWorks ever did, achieving file-format and feature parity between mobile and PC versions of MS-Office is likely to remain a huge challenge for many more years. However, Atom-based Windows tablets running regular Windows 8 will have no problem running the PC version of MS-Office, although the UI may be awkward.

It will be interesting to see how Microsoft plays its cards.