With a new package of online applications called Office 365 launching Tuesday, Microsoft Corp. is courting customers who have resisted running some of the company's most lucrative products: small- and medium-sized businesses.
If the Redmond, Wash., software maker succeeds with its online applications among those customers, it could tap into a new wave of growth for the venerable Office franchise, which is already used by more than one billion people world-wide, according to Microsoft.
The company also faces competitive issues: Google Inc. has won more converts to a rival set of online applications called Google Apps among small and mid-sized businesses than among large companies, according to analysts.
Office 365 includes the latest versions of Microsoft's familiar suite of productivity applications—Word, Outlook, Excel and others—combined with online versions of related software for server systems that most people never see. That includes Exchange for messaging, SharePoint for collaboration and Lync for conferencing and communication.
For roughly $6 per user a month, Office 365 customers will get the traditional Office applications, either accessing them through a Web browser or by installing them on their PCs. Microsoft will run all of the servers that manage the Office applications in its own data centers.
Even if they run the Office productivity applications, the targeted customers—which usually have 500 or fewer employees—have been especially reluctant to install and run Microsoft's Office server programs, in large part because of the costs associated with maintaining technology support staff and purchasing hardware.
Even Exchange, which is Microsoft's most successful Office server product in that market, is run by only about 30% of small- and medium-sized businesses, Microsoft says.
In an interview, Kurt DelBene, president of Microsoft's Office division, said he expects Office 365 to help the company expand in areas where it hasn't had success in the past and to help it get smaller business customers, who might otherwise stick with older Office software, to upgrade to the latest version of the product.
"We see this as a super-exiting way to grow our business," he said.
Mr. DelBene, citing estimates by research firm Gartner Inc., said small- and medium-sized businesses account for about 30% of total information technology spending, or roughly $100 billion a year.
Elia Wallen, president of Traveler's Haven LLC, a Denver-based provider of corporate housing, is one small company that was attracted to Microsoft's Office server software but didn't want to run them itself.
Mr. Wallen said Traveler's Haven, with about 35 employees, is subscribing to Office 365 because he doesn't want to have to research hardware products and run server programs himself. He considered Google Apps too, but didn't want to have to retrain employees to use a new set of applications.
"The biggest part of it was everyone knows the Office suite," he said.
Google sought to blunt the launch of Office 365 on Monday with a blog post in which Shan Sinha, Google Apps product manager, said the new Microsoft suite will be designed to run well primarily on Windows-based PCs, with less attention paid to devices running software made by other companies.
Mr. Sinha also said Google's business pricing for Google Apps—$5 per user a month—is simpler than that for Office 365, which varies up to $27 depending on the plan to which a customer subscribers.
"At times like these, it's worth considering a clean-slate: an approach based on entirely modern technologies, designed for today's world," Mr. Sinha wrote.
Microsoft believes its pricing is simple enough for customers to understand and says it's committed to making Office 365 run well on non-Windows devices.
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