Microsoft today announced an update to its cloud-based email and productivity services, as well as a much needed 33 percent price reduction. The software giant also criticized Google's competing entry, casting doubt on that company's claims about the number of users it has gained.

"Global organizations such as McDonald's, Rexel Group, and Tyco are choosing Microsoft Online Services for the rich capabilities, flexibility, and value they deliver," Stephen Elop from Microsoft business division said. "In just a year, we've grown to 36 countries and more than a million paying users, and we're not slowing down. We'll continue to bring new innovations and deliver the software and services businesses need to succeed."

Microsoft says that it improves its cloud-based offerings, marketed under the Business Productivity Online Suite (BPOS) umbrella, every 90 days. This quarter's updates include increasing the email storage capacity for standard users to 25 GB and new administrative scripting capabilities. All BPOS customers will be moving to the new Exchange 2010 platform as well.

Microsoft is also decreasing the monthly price of the service—which includes hosted access to Exchange, SharePoint, and Office Communications Server—from $15 to $10 per user. The price of individual hosted servers has also reduced, bringing Microsoft's superior solution much closer in price to Google's competing Google Apps service. Hosted Exchange Online is now $60 per user per year, compared to $50 per user per year for Google Apps Premium. (Google also offers a free version.)

Microsoft says that it now has over a million paying users for its BPOS solutions, which are now offered in 36 countries. 70 percent of those customers are coming from competing solutions—such as IBM Lotus Notes or Novell Groupwise—Microsoft says, so these users represent new customers for the software giant.

Microsoft also downplayed the significance of Google's claim that over 20 million people are using its Google Apps solutions. The vast majority of those users are using the free version of the service, Microsoft says, pointing to a Reuters report showing that Google had added its free education users to dramatically increase the numbers. Microsoft also has millions of users taking advantage of the free Live@Edu service, but it does not include them in its BPOS numbers.

"You simply don't know what Google's paying user numbers are," Microsoft Senior Vice President Chris Capossela said. "Analysts predict that they are pretty small. It's hard for us to really know."

As for Google's recent high-profile win in Los Angeles, Microsoft points out that Google had to make special concessions to the city around extra security and external servers, and even had to build a special version of the service called GovCloud. Microsoft already offers these kinds of capabilities via BPOS to customers with over 5,000 users. The suggestion, of course, is that Microsoft's offering is already more sophisticated.

Microsoft probably has a point there, come to think of it.

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