The single biggest and most valuable customer any software vendor could hope for is the United States government. Microsoft has had a lock on the public sector for decades. But now as many government agencies turn to the cloud to cut costs and meet slashed budgets, Microsoft finds itself in a defensive battle to retain its most important single client - including a new instance of Office 365's Web apps in the cloud targeted specifically at government agencies.
Microsoft's share of the public sector applications market is so large that, not too long ago (November 2010), Google sued the U.S. government in an effort to even be considered as a competitor. It's very difficult for anyone to compete with Microsoft Office for customers who expect their productivity functionality to be delivered to them as Microsoft Office. For enterprises, Office is not just a set of programs and file formats, but a molecule-like system of interdependent components, including training, support and "line-of-business functionality" - programs developed to be used specifically by Office apps, including customers' built-in business logic.
If anything is to render Office obsolete, it has to address all of these areas. Now, not only Google but other competitors are building arsenals of functionality capable of accomplishing precisely this in one fell swoop. Last month's announcement by Salesforce of a separate cloud-based implementation of the Force.com platform specifically for public sector customers has forced Microsoft to accelerate the pace of its efforts to forestall an outright coup.
Now, just a day after Google received critical ISO 27001 security certification for its Google Apps for Business suite, opening it up to public-sector customers who must maintain levels of compliance and auditability by law enforcement, Microsoft is announcing the availability of a separate instance of Office 365 for Government.
What This Changes, if Anything
While Office 365 does include Web-based applications and uses cloud-based storage, its hybrid licensing scheme also includes provisions for on-premise installations of Office 2010. So it isn't exactly a cloud app suite in the strictest sense. On the other hand, up until recently that hasn't been a noticeable drawback for users. But with Windows 8-based tablets on the horizon, government customers - including those who work for the big building with the white dome - are looking for Microsoft to build more full-featured Web-based apps in the Office environment, not just quick editing tools for existing documents.
A Microsoft spokesperson told ReadWriteWeb on Wednesday afternoon that the new instance of Office 365's Web apps in the cloud is not actually functionally different from its commercial counterpart, and Microsoft has also indicated the new instance won't be priced differently either. But the door is being left open for Microsoft to add new compliance features, and quite soon.
"Office 365 for Enterprise and Office 365 for Government offer the same level of functionality," the spokesperson said. "Both offer a FISMA package and have best-in-class security, transparency, and compliance features." Microsoft obtained official compliance with terms of the Federal Information Security Management Act just two weeks ago. Those terms include regulations prohibiting data of sensitive or higher class from being housed on servers outside of U.S. borders. Google actually received similar FISMA certification for its Google Apps for Government a few months before suing the very government that granted the certification.
"The difference is that Office 365 for Government separates government data from other enterprise data in the cloud," the spokesperson continued, "treating this data as unique. If the customer has no special need to be in a [multi-] tenant community that only has other U.S. government tenants, then we recommend staying in our Enterprise cloud. If the customer has a special regulatory need to migrate, we will help them do so."
Hybridization and a Word of Caution
Just last March, Microsoft's public sector vice president Curt Kolcun proposed on his company's public sector blog that public cloud-based storage may never be a perfect solution for all government agencies: "There isn’t a 'one size fits all' solution here. What works for the Department of Agriculture might not work for an intelligence agency, and that’s OK. A diversity of missions requires a portfolio of solutions... The reality is that not every workload or customer is headed to the cloud in the near future. Agencies will continue to operate IT infrastructures that include both cloud and on-premises assets, and it’s important for technology leaders to strongly consider interoperability and flexibility features when building and managing these 'hybrid' IT environments."
Since Office 365 itself relies to some degree upon hybridization, at least with respect to on-premise data storage (which, in government situations, usually ends up being networked anyway), Microsoft may need to reconsider whether its cautionary tone from this spring will help the company in its cloud applications battles this summer.
Photo of U.S. Capitol Rotunda interior by Scott Fulton.