Cloud and Office 365

Cloud is a brilliant marketing concept, but it can be difficult sometimes to pin down exactly what it means. This post looks at what Microsoft is offering in Office 365.

Office 365 is Microsoft’s version of cloud services for office applications. It provides "secure anywhere access to professional email, shared calendars, IM, video conferencing, and document collaboration". It is also a business (or multi-user) version of Windows Live, and a replacement for the earlier incarnation Business Productivity Online Services (BPOS).

My focus in this blog is what Office 365 delivers for a medium sized business. There are plenty of resources giving you the details of Office 365 features. The aim here is to show what it is, and discuss how you might use it.

Here is the admin portal. You can administer users, services and subscriptions here. Click on any of the images below to see a larger version with the details.

Office365 Admin Portal

Here is the user portal. This gives you access to Outlook, the SharePoint Team Site and Lync instant messaging.

Office365 Portal

SharePoint Team Site portal

Office365 SharePoint Home

Working with documents, either in the browser or by opening the application on the desktop

Office365 Documents

Using Word Web App. If you are thinking of using Web Apps instead of Office, you need to do a feature comparison to uderstand what you may be missing. For example:

  • In Word, no headers and footer, no section breaks
  • In Excel, no data sorting.

Of course there are far more differences than these, and you need to decide for yourself if they are relevant, but I mention these to show that it is not an academic comparison of features you never use.

Office365 Word

Using Outlook Web Access (OWA)

Office365 Outlook

Outlook options

Office365 Outlook Options

Outlook attachment, from the PC not SharePoint. You can map a drive to a SharePoint library in order to have direct access to the shared files from Outlook.

Office365 Outlook Attachment

Exchange mailbox administration

Office365 Mailbox

Exchange options

Office365 Exchange Phone and Voice

Forefront protection

Office365 Forefront for Exchange

Office 365 is a service operated by Microsoft, and of course pricing is set by Microsoft. Here is the UK pricing. Key points to note about the pricing plans:

All the pricing plans come with Exchange. Office 365 is essentially an online Exchange service plus other things on top.

The Small Business pricing plan adds Office Web Apps, somewhere to store files online (SharePoint) and an Instant messaging service (Lync).

The Midsize and Enterprise plans add SharePoint and Lync to Exchange. They have scaled up capacity and integrate with your own Active Directory. Different plans (E1 to E4) successively add features:

  • E1: Web Apps are view-only. You will need something else (Office on the desktop) to create files.
  • E2: Adds full Web Apps
  • E3: Adds Office Professional on the desktop
  • E4: Adds an on-premises Lync server for PBX

There are more feature differences that I have not mentioned, but they also add progressively through the plans.

There are also two Kiosk plans. These are like E1 and E2 but have cut-down versions of Exchange and SharePoint.

Features and pricing are changing all the time, so you will need to review features carefully before selecting a plan. However you can change plans at any time for any user, so you are not locked in to the wrong plan.

So what, really, is Office 365?

  1. It is subscription licensing, per user per month with the ability to scale down as well as up
  2. It is an online Exchange service operated by Microsoft
  3. It is an online file server or collaboration service, using SharePoint
  4. Being an online service, naturally, you can access it from anywhere
  5. You don’t need to run your own mail server, file server, mail filtering, archiving, backup server, intranet server, remote access. But you still need to run a print server, directory server, application server, management server.
  6. If you want to use the features of Microsoft Office (Word, Excel, Powerpoint and Outlook etc.) then you still need a PC or a Mac. You can’t do it from an iPad or Android tablet, or from a thin client. Office 365 is not a web-based version of Office. The exception to this is if the heavily cut down Web Apps version is sufficient.

Secure authentication for remote access

Being an online service you don’t have to provide remote access to your LAN. Your data is equally available from anywhere, so it works well for a distributed organisation. You also don’t have to provide backup and DR. But there is a curious anomaly: no two-factor authentication. Remote access creates a vulnerability to impersonation, since you cannot know who is entering the user’s credentials. Login details can easily be obtained if a user logs in from an insecure device or, for example, if the user loses a device that is configured for access, or just by guessing.

Two-factor authentication using a hardware or software token protects against this. Office 365 does not provide two-factor authentication. In this sense it is like opening your firewall to allow access to your servers: you just wouldn’t do it.

Office 365 uses Active Directory Federation Services (ADFS) to link your own directory of users with Microsoft. In your main premises the user is actually authenticating to your own AD. Remotely the user authenticates using your ADFS Proxy accessible from the Internet. The ADFS Proxy can require a more secure authentication for external access. Security vendors like RSA SecurID can integrate their two-factor authentication with your ADFS Proxy, and so enforce strong authentication in Office 365 for remote access.

Integration with other services

Being online and operated by Microsoft, there is the problem of how to integrate with other third party services. RIM have recently introduced Blackberry Business Cloud Services to integrate Office 365 with the Blackberry service. Microsoft Dynamics CRM Online will also be integrated. SharePoint Online allows you to use your own SharePoint intranet applications. As far as integrating with non-Microsoft services, that seems unlikely. I can’t at the moment see how you would integrate with EMC Documentum or Autonomy WorkSite.

You can still obtain Hosted Exchange, SharePoint and CRM separately, if the server-side features of Office 365 are not sufficient. These are multi-tenant versions of the servers run by third parties. These also use subscription licensing. And of course you can still outsouce the operation of dedicated services to run in a data center somewhere else.


When you change from using existing instructure on the LAN to using Office 365 on the Internet you need to provide additional bandwidth to it. Arguably e-mail does not need fast connections because it is asynchronous, but SharePoint as the library of shared documents will.

If you use WAN acceleration devices like Cisco WAAS or Blue Coat PacketShaper at remote sites, compression will no longer work because it requires a device at both ends, so you will need additional bandwidth at remote sites too.

Mix and match

The plans themselves are pretty much for marketing purposes. You can mix and match E (Midsize and Enterprise) and K (Kiosk) plans in the same organisation, and indeed you can simply add or remove components for any number of users. This means that, in effect, each component has a unique price that you can evaluate, and can be assigned to each user depending on their needs.

Costs and Benefits

So, the big question: if you are a 1,000 person organisation, is Office 365 a reasonable alternative to doing it yourself?

Exchange is going to cost from £16k per annum (kiosk), £31k (basic) and £52k (full). Archiving adds £23k. You will have to compare that with your own costs of running Exchange Server for 1000 users.

Office Pro Plus will cost £100 per user per annum. You can make a direct comparison of what it would cost to buy through Office 365 or through Volume Licensing. There is no difference in the end result: Office on the desktop and Web Apps online with both.

Web Apps will cost £47 per user per annum, as an alternative to the installed version of Office. You need to have SharePoint as well, to be able to use Web Apps. It can be SharePoint online or on-premises. There is no other way to obtain Web Apps as an alternative to Office installed on the desktop.

You also need to add the cost of additional bandwidth to get to Office 365 over the Internet. Your additional costs will depend on circumstances, but will be substantial.

To use Office Pro Plus you still need to run a full desktop service on Windows or Mac, or on terminal services. You will still need to run servers for:

  • Active Directory
  • DHCP and DNS
  • Print server
  • Other business applications like the finance system
  • Management of the PC’s: anti-virus, software distribution, patching, image deployment
  • Probably file server and backup server for data that is not in SharePoint. For example, SharePoint has an upload/download paradigm. I would expect a lot of people to hold data on the PC. Normally this would be redirected to a file server. So would a user roaming profile.

To run these servers, of course, you still need a computer room and IT staff. Therefore the cost-saving with Exchange Online and SharePoint Online is the incremental cost of running these on-premise in addition to the existing on-premise servers.

The mix and match aspect is important. Most of the organisations I know have Office, Exchange and SharePoint users ranging from expert to not at all. Although you can provide different editions of Office, that’s it. Office 365 Kiosk allows you to identify a body of users who only ever have light usage, and to license them at a significantly lower cost while still being integrated in the same infrastructure (the corporate directory, calendars, intranet).

If you have no existing infrastructure then there is a strategic choice to make between online and on-premise. But that is a rare situation. Most businesses aready have an infrastructure of IT services. They can choose to migrate services to Office 365 over time. For example, an upgrade to Exchange would be a good time to consider it. You really have to want to outsource Exchange and/or SharePoint for Office 365 to make sense.

Personally I don’t buy the argument about "allowing your valuable IT staff to concentrate on strategic matters". It either makes economic sense or it doesn’t. However I do think that if you remove routine tasks from IT staff then it is easier to focus on managing the remainder. The difficulty with managing IT is complexity, and so the less complexity the better.

You can obtain a trial of the Office 365 Enterprise Plan E3 here. You can also obtain a trial of the Kiosk Plan K2 here, if you are interested to see how it could work in a mix and match environment.

If you would like to contact Airdesk we can work through a cost-benefits analysis of online vs on-premise with you.

The Cloud is not a disruptive technology. It is a pricing plan.