Microsoft Slashes prices of its Cloud Offerings

By • Nov 13th, 2009 • Category: Blog

In a competitive price cutting frenzy, earlier this month, Microsoft slashed prices of its cloud services for messaging and collaboration. The company cut in half the per user price of its Exchange Online services, from $10 per user/month to $5 per user/month, and cut by 33% the price of its Business Productivity Online Services (BPOS) suite. And sweetening the deal even further for prospective customers, Microsoft also announced that it would increase its standard mailbox size from 5GB to 25GB in an effort to stay on par with the growing number of hosting providers offering “unlimited” mailbox capacity.

All of these moves are geared at positioning Microsoft’s cloud services as an even more direct competitor to Google’s Apps Premier Edition suite of messaging and collaboration services which sells for $50 per user/year, and includes basic messaging as well as a rich set of collaboration features and services.

In a way, of course this move is good for customers who now will have more choice at lower prices points than ever. However, for those of us who watch the hosted services market as we do, this latest price cutting move smacks of misguided desperation. First of all, Google Apps Premier Edition has been far from a market leader even at its very accessible price points. People tend to easily confuse the wide penetration of Google’s very successful Gmail as well as its free companion Google Apps services with the far less successful pay for Google Apps Premier Edition which in fact has not fared quite as well in the market. Google Apps Premier Edition has found success mainly with smaller companies who are deploying email for the first time and who are understandably shy and looking for a first solution with a low-cost and risk entry point. However, as these companies mature and become more comfortable with deploying email we see them generally look to move up to a more sophisticated business-quality solution (and not always a hosted one!). In re-positioning its online messaging and collaboration services in the same price range as Google Apps Premier Edition, Microsoft is needlessly cheapening its offering and appealing to a relatively narrow market base while alienating a much larger and potentially more lucrative mid and large market sector which truly views messaging and collaboration as mission-critical and does not want to run the risk of being mixed in with a low-end offering aimed at the masses. We wish Microsoft would have consulted with us before axing their prices – we would have steered them straight in what is clearly a very new market area for them!

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