Under siege from the Google Apps productivity suite, Microsoft slashed the price on its Business Productivity Online Suite by 33 percent and cut in half the price of its Exchange mail online service.
Microsoft lowered the price of its Business Productivity Online Suite (BPOS), which includes online versions of Exchange, SharePoint, Office Communications and Office Live Meeting, from $15 per month per seat to $10 per month per seat.
For its Exchange Online e-mail offering alone, Microsoft cut the price from $10 per user per month to $5 per user per month. Microsoft also increased its standard e-mail storage per user from 5 GB to 25 GB -- the same amount that Google provides for Google Apps subscriptions.
Google Apps -- which includes Gmail, Postini hosted e-mail security and archiving, Google Docs and Google Sites aimed at creating intranets -- is $50 per year, per user.
The price cuts come amid a sharp increase in customers looking to move to Google Apps to lower hefty software licensing fees for standard desktop productivity suite software.
Just last week, the Los Angeles city government approved a deal to run Google's e-mail and Internet application services under a $7.25 million contract. The deal was widely viewed as a significant win for Google over Microsoft and a vote of confidence for cloud computing.
Microsoft's price cuts also come as Google is in the midst of a major channel offensive to recruit partners for its Google Apps productivity suite.
Solution providers said the move to cloud-based productivity applications is inevitable. "Computing as a utility is going to happen, it is just a matter of when," said Mont Phelps, CEO of NWN, a solution provider based in Waltham, Mass.
At the recent CRN Fast Growth conference, Stephen Cho, director, Google Apps Channels, compared companies running private infrastructure standard applications to those that were more than 100 years ago generating their own power before the onset of electric utilities.
Cho pointed to the dramatic cost savings customers gain by adopting Google Docs rather than an on-premise offering like Microsoft Exchange.
Cho claimed the total cost of ownership for an on-premise e-mail offering like Microsoft Exchange at $300 per user, per year compared to a Google Apps total cost of ownership at $90 per year. What's more, he said Google has on average 10 minutes of downtime per month vs. 2.5 to 3.5 hours for a premise-based e-mail system.
"We have better value for businesses and it costs less, period," said Cho. "It is very trite, but it is just true. And that's why we are at the beginning of a sea change. We love to have this conversation with customers all day long. Any customer who is open to listening to facts you can turn."
