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Does Office 365 Make Microsoft a Cloud Computing Leader?

Would you buy cloud computing from Microsoft? When all is said and done, that’s the question begged by the arrival of Microsoft Office 365, now in public beta.

Described by the company as “Microsoft Office Web Apps with a set of web-enabled tools”

Office 365 combines Microsoft-hosted Exchange Online, SharePoint Online and Lync Online into a single subscription offering covering email and calendars, Web apps, websites and collaboration, and IM and online meetings.

As a beta, Office 365 is free now for now, but the version aimed at small businesses (Plan P1) will cost $6/month per user when it goes live this later this year (June?). Remember, though, that Office 365 is NOT Microsoft Office in the cloud. You want the traditional Office apps like Word and Excel, you gotta get them separately.

Now, I’m a big supporter of cloud computing, especially for smaller companies. Why shell out scarce capital for technology when you can “rent” the latest and greatest and pay as you go? And while critics point to high-profile security and reliability problems in the cloud, the reality is that most cloud providers do a better job in those areas than small businesses can afford to do for themselves.

To find out more about where Microsoft fits in here, I sat down with Betsy Frost Webb, the company’s General Manager of Online Services, to talk cloud computing and small businesses.

Despite the hype, Webb said Microsoft is NOT emphasizing the cloud connection. While many tech professionals are already living and breathing cloud computing, for most small businesses “cloud” is still not a household word.

While Microsoft research shows that small businesses have real interest in the advantages of cloud computing, in many cases, small businesses use cloud services without even realizing they’re doing so. They like not having to install software, and being able to get by without buying servers. “I don’t want to have to hire an IT person” is a common refrain, she said.

That’s why the company isn’t emphasizing the cloud angle for Office 365, instead focusing on capabilities and the familiar interface. Webb pointed out that most small businesses use some form of Microsoft Office, and that Office 365 shares familiar UI elements, including the “Ribbon” controls.

Office 365 leverages the big investments that Microsoft makes in designing and testing User Interfaces for productivity software for customers of all sizes. Mixing Office 365 with Microsoft Office lets small businesses give different kinds of workers different solutions on multiple platforms, while still maintaining a level of consistency, she said.

The question remains, of course, where do small businesses turn for cloud services – assuming they even think of it in those terms? Microsoft’s competitors here, from Google apps (known for innovation, low prices -- free? -- and little customer support) to Salesforce.com (spendy but most certainly business class) and Zoho (a nice suite of products but zero name recognition) are all banking on the “cloud” to help them muscle in on Microsoft’s turf.

I don’t think it matters whether it’s called “cloud computing” or not. Either way, the cloud business model is driving new capabilities and lower prices for small businesses. And that smells pretty sweet no matter what you call it – or who you buy it from.