Microsoft’s Cloud Strategy: Three Reasons to Worry

When Microsoft announced plans to re-brand its SaaS platform from BPOS to Office 365, I took a day or so to digest the news. No doubt, Microsoft has made some solid SaaS and cloud computing moves in the past year. But I believe this week’s rebranding efforts reveal that Microsoft’s cloud initiatives are experiencing considerable turbulence. Here’s why.

Consider two recent moves:

1. Exit, Stage Left: Microsoft earlier this week revealed that Chief Software Architect Ray Ozzie will be leaving the company. CEO Steve Ballmer put a positive spin on Ozzie’s departure, claiming Microsoft’s “progress in services and the cloud” was “now full speed ahead in all aspects of our business.”

2. What’s In A Name?: On October 19, Microsoft announced plans to dump the BPOS (Business Productivity Online Suite) brand, in favor of a new Office 365 brand. Matt Weinberger, over on The VAR Guy, likes the branding move and he also applauds Microsoft’s SMB cloud efforts. But I’m not sure I fully agree.

When it debuts in 2011, Microsoft says Office 365 will include Microsoft Exchange Online, Microsoft SharePoint Online, Microsoft Lync Online and the latest version of Microsoft Office Professional Plus desktop suite. Translation: Microsoft is taking one of its strongest brands — Office — and linking it to the cloud. (Here’s a comprehensive Q&A from Microsoft.)

Three Signs of Trouble?

What is Microsoft really saying here? A few potential answers, based purely on my speculation:

1. The BPOS Brand was stalled: I suspect many customers and partners could not follow YATAFR (yet another technology acronym from Redmond). Perhaps similarly, Microsoft may have faced challenges with Office Communications Server, which is now rebranded as Microsoft Lync.

2. The BPOS Brand was tarnished: Recent BPOS outages cast a bit of a cloud over Microsoft and its SaaS strategy. By changing the brand to Office 365, Microsoft is suggesting that (A) the company’s SaaS strategy is ubiquitous like Microsoft Office and (B) Microsoft’s SaaS platform is reliable and online 365 days out of the year. But the new name is hardly original. Just ask Seagate’s i365 storage as a service business.

3. Perhaps Ray Wasn’t Really the Man: No doubt, Microsoft has some promising cloud platforms. I hear positive buzz about Windows Azure, which continues to attract more and more ISV interest. Moreover, offerings like SharePoint Online and Exchange Online are widely popular in the SaaS world.

But something just wasn’t clicking with Microsoft’s All In cloud efforts. A few examples: Exchange 2010 has been widely available on-premise for nearly a year but it’s not yet widely available in Microsoft BPOS. That’s a real head-scratcher. Moreover, SaaS service providers like Intermedia have long offered hosted Exchange 2010, meaning that Microsoft trails its own Exchange partners in the cloud market.

Are the items above Ray Ozzie’s fault? I doubt it. Was it a coincidence that Microsoft announced Ray Ozzie’s imminent departure the same week that the company announced rebranding plans for BPOS? Perhaps.

But something doesn’t add up…

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