Microsoft's Cloud-Based Office
Shifts to Perpetual Update
By Dina Bass, June 27, 2013
Since shortly after its introduction
in 1989, Microsoft (MSFT) has
updated its popular Office suite of software every three years or so. Those
updates included revamped interfaces, new Word fonts and Excel formulas, and a
raft of fixes for bugs, some noticeable and others gnat-size. Big and small,
these updates were wrapped up together in a shiny, redesigned box with a new
price tag. Typically they were sold to individuals and companies who had
recently invested in new PCs. The formula worked for a long time, and it still
does; in 2012 there were 1 billion Office users worldwide, and the suite of
productivity software brought in more than half of the $24 billion in
global revenue generated by Microsoft’s business division.
As it shifts its Office sales model
away from programs installed on users’ hard drives and toward its cloud-based
Office 365 subscription service, Microsoft is rethinking the way it releases
software updates, and dramatically accelerating them. PC sales are
dropping—global shipments may decline 7.8 percent this year, the worst
annual drop on record, according to researcher IDC. That means new PCs can no
longer be counted on to spur software sales. Office also has a lot more
competition. Google Docs, now part of Google Drive, is an alternative to
programs such as Word and Excel. Dropbox, Box, and Jive Software (JIVE)compete
with Office’s SharePoint, its document management and collaboration software.
All of these newer entrants into
productivity software live in the cloud. Since Google (GOOG) launched
its Drive service in April 2012, it’s updated the program more than
100 times. Dropbox and Box say they update every day. More than 5 million
businesses use Google Apps daily, company spokesman Tim Drinan says. Depending
on need, Google may update the software a few times a month or a few times a
week. Drinan says the company gives enterprise customers the option of
receiving updates only at set times if they prefer not to be surprised. Box
says it has more than 150,000 business users.
Companies that update automatically
can be more responsive to customer complaints and shifting needs, and
cloud-based software doesn’t require users to keep downloading and installing
supplemental files, as Microsoft’s from-the-box customers must for occasional
bug fixes and security patches. “Microsoft understands the competitive threat,”
says Melissa Webster, an analyst at IDC. “Three years is a lifetime in tech
these days.”
Microsoft launched cloud-based
Office 365 two years ago, and in the past year has shifted its culture more
toward that of an Internet company, Vice President Jeff Teper says. A year ago,
80 percent of the engineers in Office’s servers and services group were working
on the big updates that took place every few years, and 20 percent were
assigned to quicker fixes for Office’s cloud products; now it’s the reverse.
Office 365 users receive monthly updates, and soon, Teper says, they’ll be
weekly. The Office cloud-products team, which had just a handful of data
analysts four years ago, now has dozens who track user satisfaction as updates
go live.
Teper calls it “the Yammer way,”
after the corporate social network used for collaboration within organizations,
which Microsoft acquired in July 2012. Yammer updates twice a week, and its
team helped recruit many of the new Office data analysts. Yammer co-founder
Adam Pisoni is Office’s new general manager for engineering. The change “is a
foundational shift that is permeating through the organization,” says Bobby
Kishore, an 18-year Microsoft veteran who manages engineering and operations
for Office 365.
The focus on Office 365, now a
$1 billion-a-year business, risks alienating some corporate customers.
While it’s convenient, users may find a stream of program changes disorienting.
“With all the products where they are amping up the velocity of releases,
there’s the same risk,” says Wes Miller, an analyst at the independent
consultancy Directions on Microsoft. “A broad category of customers like to see
that. There’s also a broad category of customers who are terrified by that.”
Microsoft’s own research confirms
this. In a 2010 survey of its 150 top customers, only 1 in 5 said
they were using Web-based software or planned to do so. Teper says the company
decided to ignore those signals and push forward with the development of Office
365. “We don’t want to be caught behind the eight ball,” he says. “Even if it’s
the customer saying, ‘Hey, go slower.’ ”
The Office unit says packaged
releases will still be available to users who are resistant to Office 365 and
its frequent updates, but most of the team’s energy will be focused online.
“Microsoft has an established history and trust with customers,” says Pisoni.
“So far those who are hesitant about going to the cloud, they’re willing to put
their trust in Microsoft. No other competitor—Google, Box—has that established
trust.” Raman Padmanabhan, chief information officer for Xerox’s (XRX) business
services unit, has been briefed on Microsoft’s move to faster updates and says
he supports the shift as long as the product is good. “It’s all about service
and quality,” he says. “You have to have a certain quality or it just kills
your business.”
The bottom line: As
Microsoft Office shifts to the cloud, 4 out of 5 engineers in its services
group now work on rapid Web updates.
Bass is a reporter for Bloomberg
News in Seattle.
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