On April 18, Microsoft announced that Office 365 is now in public beta. This is a big thing because it marks the last major hurdle before Office 365 becomes publicly available, an event that is expected later on this summer, just in time to become a huge factor in the decision making process that companies running Exchange 2003 have to go through to determine their best path forward.

Why focus on Exchange 2003? Well, for one thing it is the version that the majority of the Exchange code base runs today. For another, it’s old and approaching the end of its formal support life and the choice that faces Exchange 2003 customers are:

• Migrate to Office 365
• Migrate part of the company to Exchange 2010 and part to Office 365; this is sometimes referred to as a “hybrid” deployment and requires extra planning to put the necessary federation components in place to allow a high degree of interoperability between the two sides.
• Migrate all of the company to Exchange 2010

You’ll notice that the much-loved word “migrate” features in all of these options. There’s no getting away from the fact that work will be required to upgrade any email infrastructure running Exchange 2003 to a future platform. That infrastructure includes clients (Office 365 doesn’t support Outlook 2003 so that’s a factor to consider), hardware (no matter what option is taken, some servers will remain), and network (a small but important points as the network team rejigs the network to cope with the demands of Internet-centric activity). All migrations need careful planning and lots of hard work to be successful and anyone who tells you that moving to Office 365 will be easy is smoking strange but compelling material that is also mind-altering.

I’m not sure that companies running Exchange 2007 or Exchange 2010 will rush to Office 365 in the same manner. They already run modern versions of Exchange and there’s no pressing need to change because of a looming support deadline. These companies have the luxury of waiting to see how Office 365 performs in the harsh glare of production.

I think that Microsoft will strike a rich vein of interest in Office 365 from certain categories of customers:

• New companies – why go to the bother of setting up an infrastructure when you can have Microsoft do all the work.
• Small to medium companies that struggle to keep IT running (maybe because they have too many applications and too few people); it just makes sense to hand over email to Office 365 and gain SharePoint and Lync as added bonuses.
• Other companies that are willing to cede control over email to use a standard platform where they are “one amongst many”.  In essence, they trade the flexibility of a dedicated on-premises deployment for the promises extended by email in the cloud, albeit having to accept the constraints that arise from the use of a standard platform. This transition has occurred before as other utilities attained maturity – the move to use a standard electric socket for instance.

If I am right, then Microsoft will face the challenges that flow from success such as the pressure to deploy hardware within their datacenters, to help customers prepare for migration, and to perform the actual migrations. A huge amount of mailbox may be about to flow into Microsoft’s datacenters!

Office 365 isn’t for everyone. Custom platforms are still best when you want control and I don’t see the end of on-premises Exchange anytime soon. For example, anyone considering Office 365 has to be very sure that the complete ecosystem that surrounds Exchange can move into the cloud. Can applications that interface to Exchange continue to work such as a Peoplesoft HR application that automatically provisions a new mailbox when a new employee is hired? Will home-grown or third-party applications that work with Exchange data continue to function? Will all of the departments in the company be able to use Exchange as effectively as before? Email is pervasive within companies and the lessons of every migration involving Exchange are that great care has to be taken to understand the full scope of the migration rather than just looking at a simple upgrade of server technology.

I’ve been using Office 365 for a couple of months now and can report that it is a solid offering. In fact, I wonder how the folks in Mountain View will respond as Google Apps now looks pretty tired and dated, not to mention handicapped by a user interface that only its inventors could appreciate.

An understated but massive advantage that Microsoft has in its competitive efforts against Google Apps is the close working association between Office 365 and Office, something that you appreciate immediately after the configuration to connect Outlook 2010 to Office 365 takes just a few seconds and the user experience thereafter is exactly the same as if connected to a mailbox on an on-premises Exchange 2010 server. Gmail just can’t compete here. As an email system Gmail gets the job done but putting it alongside Office 365 is now like comparing a Fiat 500 to a Maserati. Both cars get you from A to B, but I know the one I’d prefer to drive.

Google is smart and capable so it will be interesting to see how they up their game in future versions of Google Apps – competition is a wonderful factor in the encouragement of innovation.

I had a great time discussing these and other factors in the decisions that surround Office 365 at “The Experts Conference” in Las Vegas today. I imagine that these conversations will continue over the next few months. Expect more developments in the Office 365 story soon!

– Tony