It seems to me that a fundamental transformation is occurring within the Office 365 datacenters that has some consequences for those who offer alternate hosted services as well as on-premises customers. And it’s all to do with the level of integration that Microsoft is now building into their Office servers.

Looking back on the past two “waves” (or generations) of Office servers, we see a progression from almost no integration in the 2010 (wave 14) releases to a perceivable attempt to make integration more of a priority in the 2013 (wave 15) releases. Perhaps it’s following a “better together” theme, but more likely the simple realization that customers become more embedded into the Microsoft server infrastructure if they use more of the functionality incorporated into the software.

Thus, Exchange 2013 and SharePoint 2013 give us the wonders of site mailboxes and integrated eDiscovery across the repositories, with Data Loss Prevention (DLP) soon to be added to SharePoint Online. Exchange 2013 and SharePoint 2013 share the Search Foundation to make cross-platform searches feasible, a development that is a good long-term step even if it creates difficulties in that it is not possible to conduct a search across mailboxes that reside on servers running different versions of Exchange.

Which brings us to what’s happening in Wave 16, the next generation of Office servers that will gradually appear in breadcrumb format in the online services, dribbled out in a series of incremental updates over the next year before code is assembled in a form that can be delivered to on-premises customers sometime in late 2015 (my best guess).

“Oslo”, now named Delve, is one of the headline features due to appear in Office 365 by the end of 2014. Beta software has not yet been made available so any assessment of what Delve is comes from descriptions provided online or in Microsoft presentations. From these it seems like the technology called Office Graph that provides the information accessible through Delve depends on being able to retrieve information from repositories like Exchange and SharePoint and meld data together in such a way as to be able to present the most important items to users based on knowledge acquired of end-user connections and activities refined by a healthy dose of machine-learning.

What’s clear here is that the underpinnings of Delve depend on a lot of integration. And that the integration is possible in Office 365 because Microsoft owns the complete environment. Knowing that everything they depend on will be in place and connected together is a different prospect for software engineers when it comes to designing new features. It opens up a new vista of possibilities.

In the past, software engineers could not assume that any necessary component was in place, which meant that invariably complicated installation and configuration instructions had to be written to explain how to knit different products together to accomplish the intended goal. The process of configuring Exchange 2013 and SharePoint 2013 to make site mailboxes possible is an example.

Now, the Office 365 engineers know exactly what software is available down to a specific build number and can therefore construct their software with a freedom that was never previously available. It’s a world of difference that enables complexity like the Office Graph.

Being able to use features enabled through very complex software without fearing that some obscure configuration glitch will cause problems is also great for end users. It also binds people more tightly to the service and makes it harder for them to move elsewhere, which is precisely the reason why Microsoft creates the feature.

But features like Delve create all manner of questions for those who don’t use Office 365. For instance, will Microsoft make the necessary components available to third party hosting companies or will these features remain a competitive advantage for Office 365? It’s reasonable that Microsoft would have some period of exclusivity both to have an advantage and to fully sort the software, but I’m sure that the third party hosting companies will view a growing functionality gap with Office 365 with some dismay because the gap makes their offering less competitive and complete. It’s also something that the competition authorities in different jurisdictions might review.

The same functionality gap seems likely to occur for on-premises customers too. At least, Microsoft has revealed that Office Graph won’t be in the next major version of Exchange. Again, there’s a certain reasonability about the position because not every customer will want to invest in the resources necessary to deploy something like the Office Graph. It therefore follows that Microsoft would be better off dedicating engineering resources to more prosaic but widely-used features than assigning them to create the installation and configuration procedures necessary for an on-premises deployment.

We can treat Office Graph as a one-off exception and assuage the fears of hosting providers and on-premises customers will not be left behind in terms of functionality. But I think the integration possibilities that now exist within the Office 365 servers will present Microsoft with the opportunity to deliver future features that will be unique to the Microsoft cloud. It just makes sense.

Follow Tony @12Knocksinna