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How Is Office 365 Really Doing?

Microsoft cited Office 365 as a bright spot in the otherwise lackluster quarterly earnings announced last week. For full coverage, see Kurt Mackie's story, "Bing Drags Down Microsoft's Q1 Earnings."

"The early success of Office 365 has surpassed our expectations. Businesses around the world, and of all sizes, are making the commitment to Microsoft's cloud services," CFO Peter Klein said during the earnings call.

Bill Koefoed, Microsoft's general manager for investor relations, added some detail about the cloud computing productivity suite, which formally launched at the very end of June, right around the start of Microsoft's current fiscal year.

"In the first 10 weeks of Office 365 availability, the number of new customers exceeded what took us over two years to build with the first version of our business productivity online service," Koefoed said.

A key difference for Office 365 is the ability for customers to purchase the full Office suite as part of the subscription, an option that wasn't available in the former Business Productivity Online Suite.

Koefoed also said Office 365 customers are buying more products and driving new revenue streams. "For example, when we've won a competitive bid in the enterprise for messaging and email, 80 percent of the new customers have bought SharePoint and Lync, in addition to Exchange," he said.

The expansive customer behavior extends to small businesses, which historically have only bought Office, Koefoed said: "Today with Office 365, 80 percent of the time, we've seen them buy the bundle of SharePoint, Lync and Exchange."

All that sounds good for the suite, as far as it goes. Microsoft has always been cagey about the number of customers buying BPOS -- the fact that Office 365 outsold it in 10 weeks underscores why. At the same time, the absence of a comprehensive advertising campaign behind Office 365 has been surprising.

The fact that Microsoft isn't yet sharing the numbers of Office 365 seats sold probably indicates that although it's exceeding Microsoft's expectations, those expectations may have been quite low.

Posted by Scott Bekker on October 27, 2011