Microsoft expands ‘cloud’ services

Web-based Exchange and Sharepoint enter beta

Microsoft owns the desktop, but its next battle will be in the network cloud, where Google and other competitors await with applications that run on the Internet rather than the desktop.

This week Microsoft rolled out some its most aggressive network-based offerings yet, opening up a public beta test of Web-based versions of its Exchange email platform and Sharepoint collaboration server. Microsoft said it would make the services generally available in the second half of the year.

Many service providers and telecom hosting companies today offer Exchange and Sharepoint hosting, putting Microsoft in competition with these partners in some respect. But Microsoft has always juggled multiple channels to its enterprise customers and balanced being a partner and competitor to service providers.

Microsoft’s guiding principle for its cloud computing strategy is “software plus services,” a clear nod to its dominance on the desktop and the goal to protect that lead online. Competitors like Google, meanwhile, are building online-only office productivity applications, touting their flexibility, ease of use and low cost (often free for individual users).

Reports place Google’s online office applications at $400 million in revenue, or about 2% to 3% of total revenues. That’s about 10x growth from just $40 million last year. By comparison, Microsoft Office revenues are about $16 billion.

Microsoft has been inching into Web-based computing for months now, relaunching its OfficeLive portal of small business services and debuting OfficeLive workspace, which provides an online workplace and storage extension to its Microsoft Office suite.

But while those services target individual or small business users, the new hosted Exchange and Sharepoint services target Microsoft’s cash-cow enterprise services. Sharepoint, in particular, has been growing strongly – and largely behind-the-scenes – as a strong, server-based, Office-flavored alternative to Web-based collaboration technologies like blogs, wikis and forum software.

Last fall Microsoft launched its hosted software services to large enterprises (more than 5000 users). This week’s announcement opens up the offer to business of all sizes. The company said Autodesk, Blockbuster, Ceridian, Coca-Cola Enterprises, Energizer Holdings, Ingersoll-Rand Company, PFT-Medway and XL Capital are among the first customers of the service.