Special Article

Office 2010 and SharePoint 2010 Value Grows in the Cloud

by Mitch Ratcliffe

The first decade of the 21st Century has been a tough one for IT. A burst bubble cratered a generation of technology startups as the decade got started, followed by a global financial wipeout in 2008 that froze IT spending at companies large and small around the world. Finally, in 2010, as it seemed the wreckage could be clearing and many companies’ hardware infrastructures were reaching an unavoidable end-of-life, the economic picture is becoming unsettled again. So, what is the IT Pro to do with regard to the launch of Office 2010 and SharePoint 2010, the backbone of most corporate productivity?

With the maturation of virtualization of applications, desktops and servers, the introduction of Office 2010 and SharePoint 2010 marks an inflection point for information architectures. Windows 7 has sold more than 150 million copies, as of this week, suggesting that a major transition from previous generations of productivity and collaboration is also getting underway as companies seek to leverage the capabilities of the new Windows stack. Hardware sales, which market research firm IDC estimates will grow by 20 percent in 2010, will not reflect the greatest impact of Windows 7, since new hardware upgrades no longer map one-to-one with software upgrades.

In this edition of TechNet On, a Forrester Research study, The Total Economic Impact of Microsoft SharePoint Server 2010 (no longer available), commissioned by Microsoft, points to three major findings:

  • Break-even on the investment to upgrade to SharePoint 2010 comes in 10.4 months, factoring in only direct costs and not accounting for the associated productivity gains;
  • For a model organization of 5,000 users, the upgrade will produce $3.1 million in savings over three years (on an investment of approximately $1.5 million), largely because it offsets the need for other upgrades to Web services that SharePoint replaces;
  • Costs are limited by the Microsoft Software Assurance program, which combines software update and support services into the licensing program to provide ongoing management support for SharePoint 2010 and Office 2010, among other Microsoft products.

None of this, however, includes the impact of “cloud” implementations on costs in the coming years. The migration of corporate and small-business data centers into the cloud, through virtualization of servers within the data center or the hosting of software–as-a-service, will transform the real cost of operating software. Taking an analogy from previous industries that have moved from selling hardware to selling service or experience, the change in computational expenses will be as dramatic as the shift from purchasing automobile or truck fleets to leasing them, which drove down costs beginning in the 1970s.

The impact of upgrading to Office 2010, according to Forrester and also a part of this edition of TechNet On, shows even more clearly the value of investing in software as the primary driver of improved productivity. Findings about the value of specific features are always debatable, and IT Pros, pundits and users can argue such things forever, however Forrester’s findings about the broad-based benefits of using Office demonstrate that productivity facilitated by better tools, such as Office 2010, can have millions of dollars of impact on the bottom line of a company.

While the bits on a network may be routed through, and by, a variety of open and proprietary protocols, most of the intellectual work done in companies today flows through a few key applications that leverage the IP and OS stacks; Office is a cornerstone of the modern workplace, and with virtualization in the form of hosted Office Web Apps accompanying the rollout of desktop software, it represents a reliable bridge from today’s computing environment to the cloud, at whatever pace is appropriate to an organization.

“At the very base level, the cloud is about delivering IT as a standardized service, freeing you up to focus on what's right for your business,” Bob Muglia, president of Microsoft’s Server and Tools Business, told attendees at Tech•Ed 2010 in New Orleans earlier this month. The cloud isn’t as fuzzy a picture when reduced to the fact that software scalability is no longer tied to hardware that a company must purchase, but to on-demand compute cycles that can be added or subtracted from a server or virtualized desktop in minutes. More money goes to the code that gets work done.

Decoupling software investments from hardware spending during the cloud era is the most important transition in IT strategy this century; it may stand for several decades as the most defining moment in the computing industry, because compute capacity will no longer be perceived to be taking up space, as the PC and server racks did when they appeared on the scene.

Office and SharePoint provide flexibility for IT managers who don’t want to jump with both feet into the cloud or to release users into the wilds of the Web with only the vague protections of user agreements to protect company information shared over the Internet. The continued ability to set and enforce business rules, to create secure workspaces, and to plug in new applications and features while servers and desktops continue to run, give IT Pros real leverage as they test the new permeability of organizations in the cloud. Starting with desktop installations of Office with a SharePoint server in the data center today sets the stage for a wide range of mixed environments that include private networks, public cloud services and novel combinations of secured corporate Web services tomorrow.

Computers are truly fading into the background, which raises the stakes for IT professionals who will be challenged to add value for their organizations. There used to be a lot of hardware to point to when justifying IT spending to business colleagues. In the near future, or today, if you choose to go all-cloud now, the business case for IT will be made solely on the productivity and business results provided through application software. IT Pros need to be factoring in the changing ratio of software to hardware spending the cloud makes possible so that their budgets are not simply cut in response to lower hardware purchasing and maintenance expenses. The savings can be applied to significant improvements in the workflows and processes facilitated by computers, if the increasing value of software is well understood by management controlling the purse strings.

You can read and judge for yourself Forrester’s research on Office 2010 and SharePoint 2010 benefits and economic returns, but we are certain that the migration of value from silicon and disc drives to software running in the cloud will be clear to readers who spend time understanding the potential of the newest Office and SharePoint offerings.

TechNet offers this week’s deployment guide for Office 2010 and SharePoint 2010 as a model IT  Pros can use to assess their options, both in terms of which features to configure and emphasize in training users and how best to put hardware resources to use. We’d like to get your feedback on the new package in our TechNet Futures conversation site, as well as in comments, the forums and wiki versions of the articles on which you have questions or amendments to make.

Mitch Ratcliffe, principal program manager of TechNet, is a veteran media builder and entrepreneur. Most recently, he cofounded BuzzLogic, a social media analytics and advertising company. He was an investor in, and advisor to, Match.com, Audible, ON24, Socialtext and many other technology leaders.

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