The Microsoft Office 365 juggernaut is rapidly gaining momentum in the enterprise market. A Gartner survey taken during early January 2016 and summarized in a complimentary Gartner webinar (which you can view by registering at this Gartner page), based on responses from 461 Gartner Research Circle members, revealed:
78% of the survey respondents indicated they are currently using or planning to use Office 365; that’s up from 65% in a similar survey taken in July 2014
Customer opinions about Microsoft remain positive, and are stronger for Office 365 customers than for Microsoft customers not currently using Office 365
Exchange Online (email and calendar) and OneDrive are considered the most important Office 365 capabilities; newer capabilities such as Office 365 Groups, Delve, Planner, and Power BI are not yet considered significant by more than 10% of the Gartner survey respondents
One of the conclusions from the research: “If you are a ‘Microsoft Shop,’ chances are you will be using Office 365 at some point.” Office 365’s market momentum is especially impressive considering the fact that the newest Office 365 tools, including Groups, Delve, and Planner, are not yet in widespread deployment. We believe Office 365’s market momentum will further accelerate as more Office 365 users start leveraging the latest tools.
This post includes overviews of the likely competitive consequences of Office 365 as it becomes even more of a communication/collaboration juggernaut. We’ll review the Office 365 competitive dynamics relative to traditional on-premises Microsoft tools and platforms, Google, Box/Dropbox, Slack, Facebook, IBM, and other vendors, and close with a summary of things we believe Microsoft has to get right in order for Office 365 to realize its full potential, at its current critical competitive crossroads.
Office 365 Versus Traditional Microsoft Products
Ironically, Microsoft’s biggest Office 365 competitor, in many global regions, is composed of earlier generations of its own products. Microsoft has made it clear that Office 365 is its strategic focus for productivity, communication, collaboration, and other domains, and is encouraging all of its customers to migrate to Office 365. The company will continue to invest in updates to its on-premises products and platforms as well, but Office 365 is where customers will see innovations first — and often exclusively — and there is a growing list of new Office 365 capabilities that won’t be available in strictly on-premises deployments. In the recent Gartner webinar, for example, the list of features that require Office 365 included:
Skype for Business embedded in client apps
Office 365 Groups
Office 365 Planner
Modern attachments in Outlook 2016
Updates for OneDrive for Business
Perhaps the most strategic competitive challenge for Office 365 today is the need to clearly and diplomatically impart the value proposition of facets of Office 365 that are not going to be available in on-premises Microsoft products and platforms. It’s good news for Microsoft that the Gartner survey suggests a significant majority of Microsoft’s enterprise customers are currently using or planning to use Office 365, but less encouraging for Microsoft to know that Exchange Online and basic file management/sharing are the most popular features, while newer Office 365 tools are not yet widely used.
From CASAHL’s perspective, increasing momentum for the exclusive-to-Office 365 tools will require a combination of market education and comprehensive migration solutions. We’ve summarized some our perspectives on these topics in several blog posts:
Leveraging New Enterprise Content/Collaboration Opportunities with Office 365 provides an overview of the latest Office 365 tools and explains how CASAHL’s migration solution and services simplify migration challenges
A Revised and Reduced Role for Traditional SharePoint in Office 365 explains the differences between traditional on-premises SharePoint and the newer collaboration/content capabilities in Office 365
New Opportunities in Activity Management and Organizational Analytics includes an overview of features introduced in Office 365 Planner and Delve Analytics
A More Conversational and Compelling Office 365 summarizes Microsoft’s new conversations-as-a-platform strategy, including Office 365 Connectors and Skype bots
Overall, we believe Microsoft’s latest innovations, along with its “mobile-first, cloud-first” commitments (delivering, for example, compelling Android and iOS Office apps), will create strong incentives for Microsoft’s enterprise customers to make Office 365 their primary focus. Hybrid deployments will continue indefinitely, especially in the largest enterprises, but the market is transitioning from on-premises to Office 365. This transition creates significant consequences for Microsoft competitors, especially Google, Box, Dropbox, Slack, Facebook, and IBM.
“Gone Google” is Shifting to “Google? Gone”
Google was able to establish impressive market share for Google Apps several years ago, before Microsoft refined its Office 365 strategy. It touted its competitive momentum in a Gone Google marketing campaign, including several YouTube videos you can view here.
Gmail has been especially popular for organizations that sought to leverage cloud economics, and Google Drive was well received by organizations needing basic cloud file sharing and sync services. That pattern is consistent with the Office 365 priorities Gartner found in its recent research (with Exchange and OneDrive at the top of the priority list), and Google had an in-market head start advantage over Microsoft’s cloud offerings.
However, Google’s overall strategy for Google Apps for Work has been inconsistent and at times confusing over the last few years, and it’s not clear where Google Apps stands relative to other Google strategic priorities, such as competing with Amazon Web Services and Microsoft Azure for cloud platform opportunities and competing with Facebook in digital advertising. Microsoft noted at its Build 2016 conference, for example, that Microsoft now has more cloud data center regions than Amazon and Google combined, providing a clear indication that Microsoft is making unprecedented investments in its cloud offerings.
Although Google Apps for Work may remain strong in relatively small and/or technology-focused organizations and in schools, it’s likely that Google will continue losing enterprise market share to Office 365 unless it makes some major changes in its Google Apps solution and its enterprise engagement strategy. As more enterprises go beyond cloud email and file sharing/sync services, Office 365 simply has a stronger value proposition than Google Apps for Work.
Microsoft also continues to have a significant competitive advantage with its Office applications, as Google’s cloud-based tools have failed to eclipse Word, Excel, and PowerPoint, and Google doesn’t offer anything comparable to OneNote. In addition, the Office Online (browser client) applications for Outlook, Word, Excel, PowerPoint, and OneNote, along with continued innovations in the native client Office applications (for Windows, Mac OS X, Android, and iOS), have neutralized Google’s initial cloud advantages in the enterprise.
CASAHL has led several very large-scale migrations from Google Apps (in particular Google Drive and Google Sites) to Microsoft SharePoint and Office 365 over the last couple years, and we expect that trend to become more widespread as Office 365 builds market momentum. For more on the CASAHL’s perspectives on Google/Microsoft competitive dynamics, see Google Apps => Office 365 Migration Patterns.
Box and Dropbox have been broadly popular, especially for enterprise employees who understand the shortcomings of using email message file attachments to share files but who have found other alternatives, such as document-oriented workspaces in traditional on-premises content/collaboration platforms, to be cumbersome. In many cases, the services are used in a “shadow IT” approach, without full consideration for enterprise content controls.
Box and Dropbox aspire to expand beyond their current file sharing and synchronization sweet spots, and to address, for example, a range of document-related conversation and workflow services. Both vendors, along with competitive services such as Google Drive, also benefitted, until recently, from limitations in OneDrive for Business (related to file sync services, to be specific).
Microsoft has addressed earlier OneDrive for Business limitations, however, and that leaves Box, Dropbox, and other similar first-generation cloud file services offering features that are redundant to native Office 365 capabilities. OneDrive also has strong synergy with Office 365 Groups, making it easy to associate file collections with an identity not tied to a single employee’s personal identity (such an organizational unit or project group identity).
As a result, many enterprises now seek to migrate out of Box and/or Dropbox. CASAHL has helped several large enterprises assess and migrate their Box/Dropbox-based content collections to SharePoint and Office 365. See this page for an overview of CASAHL’s migration solution for file system/service-based sources.
A Messaging Foundation Places Constraints on Slack
Slack is a team communications phenomenon, offering an email overload alternative to a world of knowledge workers often suffering from severe email fatigue. Slack has asserted it’s the fastest-growing business app of all time (see this Fast Company article for details), and it has established a large and loyal customer base along with an impressive ecosystem of partners that offer integration between their offerings and Slack.
As we explained in our blog post How Slack Complements Office 365 — Spoiler Alert: As a Migration Source, however, the scope of the parts of the communication/collaboration continuum Slack currently addresses is primarily limited to group chat channels, voice, and video, and it’s not clear that Slack’s communication-channel-based architecture and user experience will gracefully scale to meet large-scale enterprise needs. Indeed, there’s now a #slacklash meme discussed by people who initially had high expectations for Slack and subsequently ended up disillusioned with the tool (see #slacklash-tagged tweets on Twitter for an index of related articles and posts).
Slack is not the first attempt to address a broad range of communication/collaboration needs with a messaging-based architecture. Earlier examples include:
Google Wave, which was initially touted as a communication/collaboration breakthrough but was unceremoniously scuttled by Google only a few months after its formal release (see the Wikipedia article on Apache Wave for historical details)
Kubi Software’s unsuccessful attempt to pioneer a “collaborative email solution,” augmenting Lotus and Microsoft email platforms with collaborative capabilities (see this 2003 press release for an overview)
Zaplet, Inc. (originally known as FireDrop), another collaboration-in-email startup that launched with high hopes and significant investors (e.g., see the Forbes profile Zaplet Snags $90 Million in Funding) and was the focus on a Harvard Business School case study before faltering and eventually having its intellectual property acquired by Xobni, which in turn was acquired and subsequently shut down by Yahoo
From CASAHL’s perspective, having been focused on enterprise communication, collaboration, and content management domains for more than twenty years, these product failures are strong evidence that messaging-based tools are necessary but insufficient to meet the full range of enterprise needs. Consider this framework:
Slack currently addresses parts of the asynchronous and synchronous communication markets, and it integrates with a wide variety of collaboration tools and services, but it doesn’t offer a full solution with the breadth and depth of Office 365. Microsoft has also addressed many of the same conversational capabilities recently popularized by Slack; see our post A More Conversational and Compelling Office 365 for details.
Overall, we believe Slack will either leverage its current market momentum and capital access to expand its scope via acquisition (e.g., of collaboration- and/or content-focused startups to complement Slack’s messaging-based architecture) or be acquired by a larger competitor seeking to expand its communication/collaboration scope. Microsoft was also recently rumored to have considered an $8-billion-dollar acquisition offer for Slack, but opted to not pursue the deal, signaling confidence in its own conversations-as-a-platform strategy.
Facebook at Work on Disrupting the Enterprise Communication Market
Facebook at Work, in limited market testing as of mid-April 2016, may be poised to become the most disruptive enterprise communication/collaboration development in decades. Representing an enterprise-focused version of Facebook’s incredibly popular consumer-oriented tools and services, Facebook at Work could leapfrog Google Apps for Work to become the most significant competitive threat to Office 365. Facebook at Work will also likely create considerable competitive challenges for Slack.
Although Facebook at Work will have extensive competitive overlap with Microsoft’s conversational offerings (Office 365 Groups conversations, Skype, and Yammer), it will also have a strongly complementary fit with other facets of Office 365, especially the Office apps for content creation and collaboration. Facebook at Work may even turn into an inadvertent demand generation channel for the conversational capabilities in Office 365; end users who find Facebook at Work compelling may be encouraged by their employers to use corresponding Office 365 tools instead, in order to leverage the end-to-end governance, security, and privacy aspects of Office 365.
Overall, we believe Facebook at Work is a much bigger threat to Google Apps for Work and Slack than Office 365. Google has also lost significant ground to Facebook in digital advertising, especially for mobile devices, making the Facebook at Work/Google Apps for Work rivalry just one of many competitive fronts between Google and Facebook, and perhaps providing the impetus for Google to accelerate its enterprise offering set through the acquisition of smaller specialists such as Slack.
IBM: I’m Being Migrated
Lotus Development Corp. pioneered the groupware market with Lotus Notes, creating the first broadly successful PC-based client/server platform for email and document-based collaborative applications. IBM was able to significantly expand the Notes business after it acquired Lotus Development in 1995, and had some success with other Notes/Domino-based products including QuickPlace, Domino Document Manager, and Quickr.
More recently, IBM introduced Connections, a Web-centric and activity stream-based communications tool, and Verse, a cloud-based email service. It has also partnered with Box for a number of cloud-based solutions (see, for example, IBM and Box Forge Global Partnership to Transform Work in the Cloud). IBM is also rumored to be an enthusiastic Slack customer, which is probably a bit awkward for the IBM Connections product team.
In the broader competitive landscape, IBM has been losing competitive ground to Microsoft for most of the past twenty years, and that dynamic is accelerating with the expanding success of Office 365. While “true blue” IBM customers may continue to use IBM’s communication/collaboration offerings for years to come, there has been a big business in IBM migration solutions for many years, a topic covered in our post on Migrating Notes/Domino Deployments to Office 365.
Other Office 365 Competitive Considerations
Although there are many other vendors competing in the enterprise communication/collaboration market, and open source projects continue to play a role as well, the mainstream enterprise market is currently dominated by Microsoft and Google, with Slack gaining a lot of attention, Facebook at Work likely to become disruptive when it’s widely available, and IBM losing momentum.
Atlassian is another notable competitor, offering a family of conversation and communication tools (HipChat), and enterprise wiki (Confluence), and a project- and issue-tracking platform (JIRA). Atlassian is something of a quiet company, in terms of advertising and market hype, but it has been profitable for a decade, is experiencing impressive growth, and is a publicly traded company valued at more than $5 billion (as of mid-April 2016). Atlassian could become an attractive acquisition target for a larger player seeking to more broadly compete with Office 365, such as Amazon or Google.
Microsoft has also acquired several companies to accelerate its communication/collaboration agenda, e.g., the apps that are now known as Android and iOS Outlook, some leading-edge organizational analytics tools, and, several years ago, Yammer and Groove Networks, among others.
Considering the scale of the enterprise communication/collaboration/content market opportunity, we wouldn’t be surprised to see both Slack and Atlassian acquired, as the competition among Amazon, Facebook, Google, and Microsoft continues to escalate.
What Microsoft Needs to Get Right
CASAHL has been exclusively focused on enterprise content and collaboration domains since 1993. We have delivered pioneering migration and integration solutions amid market dynamics including groupware, enterprise 2.0, social software, and most recently the mobile-first/cloud-first shift. Across all of those market transitions, Office 365 is the most impressive enterprise platform juggernaut we’ve ever seen, and we believe it will revitalize and significantly expand Microsoft’s enterprise business.
As the overview of related competitive dynamics in this post suggests, however, there are several strategic competitors seeking to address the same market opportunities. To realize the full potential of Office 365, we believe Microsoft needs to successfully address three fundamental challenges.
First, Microsoft needs to provide clear and consistent criteria on what to use when – guidance on which Office 365 tools and services should be considered for different communication, collaboration, and content scenarios. Letting enterprise customers default to continuing with traditional SharePoint-based approaches, for example, will not lead to full leverage of the new innovations embodied in Office Graph, Delve, Groups, OneDrive, and other Office 365 advances. For more on CASAHL’s perspectives on the what-to-use-when topic, see our post How to Avoid the “Collaboration Curse.”
Second, Microsoft, working with its partners, needs to streamline and simplify migration to Office 365 from on-premises and first-generation cloud products and platforms. Email migration is now relatively straightforward, but the migration of content and collaborative applications, especially when working with multiple source systems (e.g., traditional SharePoint, Lotus Notes, Google Sites/Drive, and others), can be unwieldy and unnecessarily expensive if the right migration solutions aren’t used. The CASAHL DART solution is focused on this enterprise need, along with CASAHL services that cover all facets of multi-source content/collaboration migrations to Office 365.
The third challenge involves keeping Office 365 content/collaboration deployments optimized after migration from legacy sources. To avoid repeating earlier content/collaboration chaos and complexity patterns, and to keep up with the latest Office 365 tools and services, enterprises need efficient and effective ways to keep their Office 365-based resources focused and fresh. We share our perspectives on this topic in our post Ongoing Office 365 Content and App Optimization.
Overall, we at CASAHL are excited about the renewed innovation in enterprise communication, collaboration, and content management led by Office 365, and we’re privileged to be Microsoft’s preferred partner for several migration needs. The Office 365 juggernaut is creating significant new opportunities for Microsoft’s enterprise customers, along with considerable challenges for Microsoft competitors.