Microsoft is in a very critical period with their fiscal year ending this week, as my colleague Duncan Jones recently wrote. But today, Steve Ballmer is announcing one of Microsoft’s most important products in the company’s history – Office 365. Sound like an embellishment? It’s not – and it’s because Office 365’s release is not just the launch of a new technical solution for customers, but also a change in the relationship with their customers. Microsoft’s Office 365 is the single biggest change to the Microsoft customer relationship since the introduction of Software Assurance and the modern Enterprise Agreement in 2001.
For those that are blissfully unaware of Microsoft licensing, Software Assurance is Microsoft’s software maintenance relationship with customers and represents a large part of Microsoft’s predictable annual income. I wrote earlier about how cloud services like Windows Intune change the nature of this relationship – from one based on rights to upgrades and later releases of software, which for some customers had questionable predictable value – to one where a customer sees more predictable value by delivering benefits and services that truly offset internal costs. We know that we sink large sums of time and money into running email and collaboration services ourselves. Microsoft takes on far more responsibility and Office 365 exemplifies that motion. Cloud services solve Microsoft’s greatest challenge, building an annuity relationship with a customer that will be less risky to continue to deliver.