Microsoft Office 365, launched formally in June 2011, is a strategic project for Microsoft. The signs are that Microsoft has been successful in convincing many companies of the solution's advantages.

As a subscriber, I'm happy with Office 365, despite some hiccups that have marred its reliability record. Still, I'm amused by the hype that surrounds many Office 365 discussions. In this article, I bring together 10 points that supporters often stress when making a case for Office 365 -- and I seek to balance the debate with 10 points of caution. You undoubtedly have your own view, but each of these arguments has sense to it -- so read both lists with an open mind!

10 Advantages of Office 365

Given the enormous investment that Microsoft has made in data centers, software engineering, operations, and staff to build, deploy, and manage Office 365, it's not surprising that the service is an easy sell. This list describes the top 10 advantages that companies can gain if they move to Office 365.

1    Predictable ongoing costs. Knowing what your costs will be on a month-to-month basis is the number-one advantage put forward by Office 365 supporters. Microsoft offers a range of Office 365 plans, each represented by different functionality. You can host email only (the Exchange Online plan). Or you can go higher, through plans that are designed for professionals and small businesses (the P plans), up to those intended for use by larger enterprises (the E plans). In March 2012, Microsoft reduced the prices for some plans to reflect competitive needs and to take account of customer feedback. In particular, the four E plans received reductions of 18 to 20 percent. Even though Microsoft hasn't reduced the monthly cost of the Office 365 Plan P subscription from $6, it's still a relative bargain for the functionality. This is especially true if you already have a copy of Office 2013, 2010, or 2007 that you can use to connect to Office 365. (The array of available plans can be confusing at first, so it pays to consult someone who is familiar with Office 365 to determine the best plan for your business.)

Whichever plan you choose, the key factor in realizing benefits from Office 365 is to ensure that current IT spending is reallocated to productive purposes rather than to areas that don't contribute to the bottom line. For example, opting for a cloud service releases funds that would otherwise be spent on servers, storage, and hardware maintenance. These funds could be used to develop new software applications that improve and streamline business processes. Or they could be used to fund investment in some other area of technology, such as equipping the sales force with new mobile devices.           

2    Service expandability. It's great to be able to add or remove subscriptions at will and pay only for what you use on a monthly basis. Although you might end up paying for unused subscriptions (in the same way that on-premises licenses are often unused after purchase), the nature of the monthly payment draws natural attention to the number of subscriptions and makes it easier for small-to-midsized businesses (SMBs) to track costs.

Microsoft still has some work to do. Making better usage reporting available through the administration portal would be appreciated. It would also be useful if Microsoft would remove the block that stops small companies that use Plan P subscriptions from easily moving to Plan E. This block just doesn't make sense: You never know when growth will come to a company, and it's unnatural for a cloud service to build in artificial blocks that inhibit expandability.

3    No more software maintenance. Eliminating software maintenance is a big deal, especially for anyone running Microsoft Exchange Server 2007 or Exchange Server 2003 and wondering about the cost and effort required to migrate to Exchange Server 2013. Add the necessity of keeping track as Microsoft releases service packs, roll-up updates, and future versions -- and the need to determine that nothing in them will cause problems within your environment. (This is an issue that we've seen with roll-up updates for Exchange 2010 during 2011 and 2012.)

4    Reliability. The reliability factor of Office 365 isn't so much a 99.9 percent service level agreement (SLA); Microsoft hasn't actually achieved this level of performance for any reasonable length of time. (Four notable outages have occurred while Office 365 has been in full production, but it's fair to say that these outages did not affect all users of the service.) At this point, Microsoft needs to keep plugging away to meet its own SLA goals and then match the performance that Google has achieved for its cloud services.

I prefer to focus on the fact that Office 365 delivers better availability to users than most SMB IT organizations can provide. Let's face it: There's no comparison between the availability that can be provided by a server in an office (the anecdotal computer under the desk) and the power of a modern data center. That being said, even the oldest computer in a local office delivers better availability if you can't connect to a remote data center because of some Internet problem or insufficient bandwidth.

5    Client choice. Fat and feature-rich clients such as Microsoft Outlook often get the most attention when the discussion turns to clients. But it's much more interesting to consider the recent work that Microsoft has done in the area of web and mobile clients. In the case of Exchange, the Outlook Web App (OWA) client runs on Microsoft Internet Explorer (IE), Google Chrome, Mozilla Firefox, Apple Safari, and other browsers and does a pretty good job across multiple platforms. But if you're using a mobile client, you're more likely to use one that takes advantage of the many Microsoft ActiveSync licensing deals that the company has made with major mobile device vendors over the past few years. From iOS to Android to Windows Phone to Windows RT, ActiveSync makes a connection possible.

6    Access. SMBs (or sometimes even large companies) can find it difficult to build and operate an infrastructure that supports secure remote access for users. You immediately get this access on a worldwide basis when you subscribe to Office 365 -- and you can use all the clients that we've just discussed. After you experience anywhere access, you'll never want to go back to traveling to the office to read email or access a Microsoft SharePoint site. It's just so much more productive to be able to work anytime, anywhere. Although Office 365 supports dual-factor authentication methods that might be insufficient for some companies that have specific requirements, I suspect that many of these access issues will be solved as time goes by.

7    An array of on-premises and hybrid options. Cloud services are absolutely the right choice for some companies. Others will never want to go near the cloud for reasons that make sense in context. And a large group in the middle can make use of cloud services for some purposes but want to keep a portion of their capability on-premises. The choice of available deployment options for Exchange, SharePoint, and Lync -- as well as the work that Microsoft has done to enable essential features such as single-sign on (SSO) and the ability to move data freely between platforms -- delivers huge flexibility to companies as they consider their options. More work to continually improve and make hybrid configurations easier to create and maintain will likely happen over the next few years. For example, the creation of the Hybrid Configuration Wizard in Exchange 2010 Service Pack 2 (SP2) is a great example of how to automate many manual steps.

Another point to consider is how on-premises deployments should benefit from the improvements in system automation and other aspects of systems administration that Microsoft simply must deliver to drive efficiencies in its data centers. I see a lot of this focus in Windows Server 2012. It will be interesting to see this story evolve over the next several years.

8    Additional value pools to exploit. Many companies will see sufficient value in moving to Office 365 for email alone. They can replace their current (and potentially old) Exchange servers with Exchange Online, a discussion that's bound to take place as companies that run Exchange 2003 today consider their future options. The nice thing about Office 365 is that email is a great start, but it's only that -- a start. Enormous value can be extracted by enabling online collaboration with Lync Online or document management with SharePoint. And Exchange administrators who worry about losing their jobs as work transitions to the cloud can deliver new value working with SharePoint and Lync.

9    Security. Microsoft has exerted enormous effort to ensure that its data centers meet every conceivable security and audit requirement that pertains under multiple jurisdictions. Some issues exist (e.g., the potential requirement for Microsoft to make data available under the US Patriot Act, making its data centers less attractive for non-American companies). Still, anyone who has had the opportunity to visit a Microsoft data center can attest to the physical security that exists to prevent unauthorized access. The same dedication exists at the software level. Microsoft understands that a breach of security that exposes Office 365 customer data to unauthorized access would have a huge and continuing impact on its business. Given the experience and expertise available to Microsoft in both its engineering groups and data-center operations, I suspect that the company will do a better job of keeping customer data secure than even those customers' IT departments can do.

10   Ease of transition. Office 365 supports a variety of transition options to meet the requirements of differently sized companies. Some will be able to move to Office 365 with a certain amount of planning and a single "big bang" operation over a weekend. Others will use a phased approach and move tens, hundreds, or even thousands of users weekly until the whole company has been transitioned. And others will maintain a hybrid configuration on an ongoing basis.

The important thing is that there are sufficient high-quality tools available to migrate from older versions of Microsoft technology as well as from other platforms (e.g., Novell GroupWise, Lotus Notes, and IMAP or POP3 email systems). Some of these tools must be bought from third parties; others are free from Microsoft. All take a certain amount of planning. The old truism that each hour's preparation pays big benefits is as valid here as in any software project.

This list makes Office 365 look good. In fact, for some it's a pretty compelling offering. But there are downsides to consuming a cloud service. After all, you don't expect to exert much control over the Apple iTunes service or to tell Amazon how to run its Elastic Compute Cloud (EC2). We must therefore consider the downside before plunging into the cloud.

10 Potential Problems with Office 365   

Much value can be extracted from Office 365. And it's natural for small companies that aren't IT literate to dedicate resources doing what they do best rather than figuring out the complexities of deploying and managing software. It's easy to imagine that a large proportion of SMBs with IT based around Windows Small Business Server and the associated applications will move to Office 365 over the next few years (assuming that sufficient Internet connectivity is available). However, the decision to move platforms becomes more complex as the number of users grows.

The following list offers some points that might negatively influence the decision to move to Office 365. Like any technology debate, it's important to put the negative points in context and weigh them up against the advantages, to arrive at a balanced decision for your company.

1    Reliability. Yes, this item is also on the list of advantages. After all, Office 365 delivers a reliable and robust service -- most of the time. However, several high-profile outages have taken some gloss from the service. The root causes appear to be operational lapses of the type that you would hope wouldn't occur. These outages might be indicative of growing pains that have been eliminated and will not recur. But the first goal for Office 365 is to first meet its own 99.9 percent SLA over an extended period, then to surpass the service performance delivered by its major rival. In the end, whether reliability comes in as a plus or a minus depends on your company.

2    Lack of flexibility. Office 365 is a bounded service. In other words, if what you want to do is already available, you'll be happy. But don't ask for additional features. The Office 365 team can't provide specific features for individual customers. Everyone gets to use the same service and access the same feature set. Microsoft will update Office 365 with bug fixes, service packs, new features, and new versions according to its own schedule. It's entirely possible that a desired feature might appear in one of these updates. If not, you'll need to wait.

Another potential issue relates to integration. You won't enjoy the flexibility you might expect in connecting applications to support business processes. For example, many companies integrate application provisioning (e.g., creating an Active Directory -- AD -- account, setting up an Exchange mailbox, and populating a SharePoint personal site) into the process of adding new employees. (Or conversely, they integrate the process of eliminating these items when employees leave.) By using Windows PowerShell, this approach might still be possible with Office 365, but it's definitely something you need to confirm first.

3    Support for older clients. Many companies still use Outlook 2003, a client that Office 365 doesn't support, at least not for Messaging API (MAPI) connections. The reason is simple: Office 365 doesn't support public folders, so it can't offer the free/busy and Offline Address Book (OAB) service to Outlook clients that depend on public folders. This isn't an issue if you have plans to deploy a more modern client (Outlook 2010 or 2013 is recommended), but companies are often surprised when they discover that older clients can't be connected. (Note that Exchange 2013 doesn't support Outlook 2003 clients either, so you'll also face the question about what to do with these clients if you plan to stay on-premises.)

4    Migrations. Smiles break out on administrator faces whenever migrations are proposed. It's such a fun activity. Seriously though, migrations are usually costly, extended affairs with a high potential for error. Given sufficient preparation, small companies with a few hundred users can migrate to Office 365 over a weekend. Larger companies, especially those that want to keep some work on-premises, have a lot more work to do over a longer period. They might need to deploy additional hardware and software -- for example, to support AD Federation Services (ADFS) -- or use the services of external consultants who have experience linking to Office 365, especially when complex AD configurations are in use. All this results in additional cost that must be factored into the overall project.

5    Realistic cost assessment. Making the decision to pay $6/month for 10 users isn't going to break the bank and is usually a cost-effective move for a small company. The calculation isn't so straightforward as the number of users rises. Many IT administrators figure that they can provide a better service to their company for the same amount as Office 365 will charge, after everything is factored into the decision. Therefore, it's important to think past the simple, low-cost-per-month equation that marketing and sales teams push and look at the overall cost to deploy, manage, and maintain the systems that you need over a reasonable period (i.e., 3 or 4 years).

You might be able to save money by squeezing some additional time out of server hardware, not upgrading client software, or eliminating software licenses that you don't need. In this respect, you should focus on what people need to do their jobs rather than on headline features. For example, access to email on the road is now a business essential; a 25GB mailbox is a nice-to-have (it takes so long for most people to accumulate that much email). On the credit side, you might be able to deliver a better and more flexible service than the "all-in-one" service from Office 365. A focus on adding value to the business by solving business problems rather than simply delivering technology is always appreciated and might tip the balance.

6    Inconsistency across Office 365 applications. Despite the existence of Microsoft Business Productivity Online Suite (BPOS), a previous iteration of online applications that proved to be as reliable as its name was unloved, much of the Office 365 infrastructure is very much in its first version. (Microsoft will upgrade the Exchange, Lync, and SharePoint applications in 2013.) The actual user clients, such as OWA, are well-developed and functional. However, the administrative interfaces were clearly developed by three engineering groups who obviously didn't spend much time talking to one another. Of course, Microsoft is in the middle of a transition from traditional server-management techniques to the kind of remote management that's envisaged in Server 2012, so it's probably understandable that the three Office 365 applications present different views of how to manage settings. More consistency is expected in the future.

7    The one-in-a-crowd support experience. Office 365 depends on email and phone support and encourages users to help themselves with online troubleshooting tools and forums. Although this approach is perfectly understandable in terms of reducing costs, DIY support might come as a culture shock for companies that have become accustomed to the more personal interaction that often occurs with a local Microsoft office. Even if your local Microsoft team remains engaged, it won't be able to assist when problems occur with Office 365. Support for Office 365 follows a factory model with extremely tight and well-defined processes that apply to everyone. Thus, instead of being an individual customer who receives individual support based on a support plan that was negotiated with the local Microsoft office, you become one in a million and receive exactly the same support -- good or bad -- as everyone else.

8    Public folders. As mentioned earlier, Office 365 doesn't support public folders. Microsoft has published a guide to migration from public folders, which essentially recommends that anyone using Exchange public folders today should move to other repositories, such as Exchange shared mailboxes or SharePoint Online. This approach is viable when public folders are used for simple storage or document management. Everything becomes much more complex when users depend on electronic forms or any other enhanced use of public folders. Unless the applications are no longer required or can be replaced with something like an intelligent Microsoft Excel worksheet, you might need to rewrite applications. That's usually an expensive and long process. Microsoft does plan to support "modern" public folders when Exchange 2013 is used by Office 365. However, the migration path is uncertain, untested, and unknown at this point.

[Update: since this article was written Microsoft introduced support for public folders to Office 365, but only the modern variety supported by Exchange 2013. A migration is required to move old-style public folders to the new type. The bad news is that the migration process is very manual. See this article for more information.]

9    Inflexible administration tools. Compared with on-premises deployment, the administrative tools that are available for Office 365 can be inflexible. Microsoft's response will probably be that the tools are designed to work within a well-defined structure and to serve the needs of service users. The point is that when you control your own administrative environment, you can make whichever changes make sense. For example, you can deploy a specific mobile-device monitoring tool to ensure that your ActiveSync-compliant devices are functioning properly. Or you can install programs to analyze Exchange message-tracking logs, to extract statistics about message volume, top senders, and so on. But when you opt for a cloud service, you must accept that the service is bounded and therefore can't be tailored to meet individual requirements; doing so would create a support nightmare. APIs such as Exchange Web Services do expose data that can be used. But there's a dearth of third-party products available that work against Office 365, compared with on-premises servers. The balance will likely shift eventually, but that hasn't happened yet.

10   No Plan B. Microsoft obviously offers a lot of support to companies that want to move to Office 365. But what's the situation if a company decides that the cloud doesn't work for it?

Those who run hybrid Exchange deployments can move mailboxes back to on-premises servers reasonably easily, gradually backing out of Office 365. After the last mailbox is moved, the federation trust can be broken to isolate the on-premises servers. To complete the move, any data that resides in SharePoint Online must be moved to on-premises servers; conferencing must be moved to on-premises Lync servers. This is all possible, but as far as I know, it hasn't been done to date. Things are a little more complex for companies that have gone through a big-bang migration. These companies have no link to on-premises servers and therefore must plan for a second big-bang migration to move back to their own computing resources. Mailboxes can be exported to personal folder stores (PSTs) and imported back onto on-premises servers; SharePoint documents can likewise be exported and imported; and Lync servers are set up to take over conferencing. Once again, these approaches are all possible but probably expensive in terms of planning and execution.


It's All Up to You

At the end of the day, the decision to stay with on-premises technology or to move to a cloud computing service is highly specific to the stresses and demands that exist within individual companies. The points that I've outlined here are rather broad and represent only a starting point for the debate. The decision will be easy for some and thorny for others. In either case, carry out the necessary due diligence before making your choice.