There’s no question that Office 365 has been a big hit for Microsoft. The company has successfully transformed its near-ubiquitous office suite from a licensing purchase to an equally near-ubiquitous subscription. Office 365 has been one of the fastest-growing and biggest cloud offerings that the industry points to as a sign of cloud success
But is it being used as a cloud-based solution?
Toronto-based solution provider Softchoice decided to look into just that, and in a survey of almost 900 customers in the U.S. and Canada found that nearly two thirds of Office 365 customers it surveyed pay for their subscription, but don’t use the cloud-based backend.
“It’s been a big surprise for us how slow the adoption of Office 365 workloads in the cloud has actually been,” said Chris Woodin, senior director of the Microsoft business at Softchoice. “We’ve seen lots of adoption of Office 365 as a licensing model, and half our Office revenues are through 365. But the range of workloads and customers are using online is still somewhat limited in spite of the cost and productivity gains to be found.”
Softchoice found that 61 per cent of its customers who purchase Office 365 subscriptions for the end-user software still retain some or all of the on-premise infrastructure — running and maintaining their own Exchange, SharePoint, Skype for Business, or other server software installations, and not taking advantage of Office 365 online components such as Yammer and OneDrive.
The company found that Exchange is 365 component most used in the cloud, with a very slim majority (52 per cent) of users running their mail from the cloud. The numbers for Skype and Sharepoint drop to less than half of that usage, with 22 and 24 per cent, respectively, using the cloud-based instances of those applications. Woodin said the low acceptance of Skype in the cloud is particularly surprising, given the nature of that app.
The solution provider estimates that for a 5,000-seat deployment, that decision to keep servers on-prem is costing customers $1.65 million (U.S.) a year.
It’s not technical issues or even concerns about the cloud that have led to customers standing pat, Woodin notes. Rather, inertia is the enemy here.
“They just haven’t taken the initiative to migrate and change the way the use those workloads. They’ve been doing it that way for a long time, and people are in place around on-premise infrastructure,” Woodin said. “Most CIOs and CFOs realize the benefits of moving online, but the energy required to make the migration is not there right now. It’s not a burning fire, so it hasn’t been a priority.”
A secondary concern has been the issue of taking short-term costs for migration planning and execution in order to realize savings in the long term — furthering the “if it ain’t broke, don’t fix it” narrative.
The decision to keep the on-prem servers up and running not only costs the customer money, Woodin said it also costs the solution provider cash, with VARs missing out on a range of managed service opportunities ranging from simple user support to full outsources management, support, and administration.
“Customers who go from on-premise to the cloud have a much higher likelihood to use our managed services,” he said. “They rely on a combination of Microsoft and Softhoice.”
Woodin said Softchoice typically works on the cost analysis of the cloud move to convince customers to make the move. In many cases, being shown the long-term math of taking a near-term hit for the migration in order to reduce infrastructure, licensing, and staffing costs in the long term is enough to do the trick.
But in recent months, Woodin said the solution provider is getting a boost from an unexpected factor — the WannaCry ransomware attack.
“Although it wasn’t an attack on Exchange, customers are more concerned about security than ever, and understand that Microsoft is more capable of keeping their data more secure when using Office 365 online and not on-prem.”
And over the last six months, Woodin reports the company has seen “a spike” in the number of new customers moving Office 365 infrastructure into the cloud for the first time. The motion typically starts with Exchange, he noted, but Softchoice is starting to see customers also moving Skype and SharePoint into the cloud. And those cloud gains extend to Yammer and OneDrive when it comes to customers either new to the application category, or moving from non-Microsoft competitors into the 365 components.