News

Microsoft Cuts Online Services Pricing

• By Herb Torrens
• 11/03/2009

Microsoft announced that it has bulked up some its software-as-a-service offerings and lowered prices.

Prices were reduced on Microsoft's Business Productivity Online Suite (BPOS), as well as its Dynamics CRM Online service.

BPOS will now sell for $10 per seat per month (with a five-seat minimum). Moreover, Microsoft plans to expand the service, which will be available in 15 additional countries later this week. BPOS provides hosted collaboration and communications software based on Microsoft Exchange Online, SharePoint Online, Office Communications Online and Office Live Meeting. BPOS was previously sold at $15 per seat per month.

Microsoft cut the BPOS price because of rapid customer adoption on a global scale, according to Stephen Elop, Microsoft's Business Division president, in a statement released on Monday.

According to Elop's announcement, BPOS will be updated every 90 days with new capabilities. In the next quarter, Exchange Online mail box storage will be increased to 25 GB for standard service users.

In a separate announcement on Tuesday, Microsoft indicated a price cut for Dynamics CRM Online. This customer relationship management service is now available to organizations at $44 per user per month. The service includes offline support, 200 custom entities, 200 workflows and 5 GB of storage. Previously, Dynamics CRM Online was priced at $59 per user per month.

In addition, Microsoft issued a new service update (known as "November 2009") for Microsoft Dynamics CRM Online. The update adds features for end users plus a data import tool for IT administrators, among other benefits. There's also a promo: organizations can get six months of Dynamics CRM for free if they switch from Salesforce.com or Oracle CRM On Demand.

Brad Wilson, general manager of Microsoft Dynamics CRM, described the price cut as a move to "offer more value at a lower price." However, the price cuts do seem to signal a building competitive tension in the cloud computing space.

"There's no question that Microsoft is reacting to not only the new wave of offerings from the likes of Google and Amazon, but also to the traction these online applications are getting in the enterprise," said Jeff Kaplan, managing director of THINKstrategies, a Wellesley, Mass.-based consultancy, in a telephone interview.

Kaplan said the adoption rate of online offerings -- such as The City of Los Angeles' new contract to use hosted Google Apps over installed Microsoft Exchange -- has gotten Microsoft's attention.

"This [cloud computing model] is a real, tangible business model that delivers a greater value in a shorter time frame," Kaplan said. "And the nature of this trend is that business needs are evolving to more mobile and collaborative applications that traditional on-premises software just does not address."

Indeed, Microsoft's new service update to Dynamics CRM Online adds "Mobile Express" capability, which allows users to access the CRM program from mobile devices.

"Microsoft has been forced to pay attention to this trend because you just can't stay competitive with the old way of doing business," Kaplan said.