Microsoft Goes Live With Long-Awaited Office 365 Cloud Apps

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Microsoft took a major step in its cloud computing efforts today, going live with the company's much anticipated Office 365 cloud application service in 40 markets around the world.

CEO Steve Ballmer, in a press conference in New York Tuesday morning, emphasized the expected demand for Office 365 among small and mid-size customers and said Microsoft's channel partners will play a critical role in bringing the service to SMBs.

"We know we need to engage our massive global partner ecosystem of systems integrators and resellers," Ballmer said.

Microsoft has struck deals with 20 service providers who will make the Office 365 service available to their customers, packaging it with their own services for SMBs, Ballmer said. Those telecommunications and Web hosting companies include Bell Canada, Intuit, NTT Communications, Orange, Telefonica S.A., Telstra and Vodaphone Group.

But smaller solution providers are also working with Office 365. Chicago-based Slalom Consulting, which already works with Microsoft's BPOS (Business Productivity Online Services), will work with the new on-demand Office 365 applications. "It takes the BPOS model to a whole new level," Slalom General Manager Dave Cutler said in an interview.

"Twenty-five percent of our business this year will be cloud," Cutler said, adding that Office 365 will be a major part of that. While Slalom earns some revenue from selling on-demand software, Cutler said his company's model is to provide business consulting, technical migration and training services around the cloud applications.

As with the BPOS service, Microsoft channel partners who resell Office 365 will earn 12 percent of the value of the contract's first year and 6 percent of subsequent years, said John Betz, product management director with Microsoft's business online services group, in an interview.

While customers can subscribe to Office 365 directly from Microsoft, Betz said the vendor will likely bring a partner into most deals. Currently, 95 percent of all Microsoft's revenue is generated through the channel "and we don't expect that to change in the world of cloud computing," he said.

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