This week marks the five-year anniversary of Office 365, and it’s remarkable to reflect on the progress Microsoft has made in the cloud market. Under Satya Nadella, Microsoft has made a highly publicized strategic shift towards the cloud. The CEO has called cloud computing the largest market the company has ever participated in.
The transition reflects users’ new preference for cloud-based software. Once a symbol of traditional IT conservatism, Microsoft is now reinventing itself as an innovator for the cloud-first world. The LinkedIn acquisition provides a glimpse into the company’s vision for a vast, cloud-powered professional ecosystem.
Microsoft has delivered astounding growth numbers for its overall SaaS business, increasing subscribers by 79 percent year-over-year and revenue by 63 percent from Q2 to Q3. While Microsoft called out consumer subscribers in their earnings, enterprise adoption is set to carry the next wave of growth.
In the past year, Office 365 is leading the way to Microsoft’s aspirations for cloud domination. It has seen triple digit growth numbers to become the single most-used enterprise cloud service. Statistics show we are still in the early days of the market, however, with only about 20 percent of employees migrated to the cloud-based solution.
The most rapid growth may still be ahead for the five-year-old service – as more companies deploy Office 365 as their corporate standard, the adoption rate will continue to rise at an accelerated clip. While cybersecurity concerns originally kept companies away from cloud services, businesses now recognize Microsoft’s investment in Office 365’s built-in security as a strategic benefit. No amount of application security, however, can protect customers from themselves.
Companies today commit major security blunders, like uploading over 200 files to the cloud with “password” in the name. The vast majority of cloud security incidents are likely to come from the customer’s side, and new research shows just how far companies have to go to prepare for the future of work tools.
From Selling to Renting
Moving to cloud offerings means adopting a subscription model where customers rent software versus a one-time purchase. The strategy makes financial sense, according to Microsoft CFO Amy Hood. Customers who purchase an E-3 plan – which includes cloud-based versions of Office applications as well as Exchange Online, SharePoint Online, and Skype – pay 80 percent more than customers who purchase software upgrades every 5-7 years.
Why would customers opt to pay more? For one, they no longer need to worry about paying for and maintaining their own infrastructure. The acquisition of LinkedIn has the potential to make the product even stickier by integrating social insights into work applications. Furthermore, updating traditional software can take months for a large company, whereas cloud customers always receive the latest updates automatically – including security updates. Companies in regulated industries and even US government agencies realize cloud makes economic and cybersecurity sense.
If you’re skeptical whether companies will outsource their data to another company’s servers, consider that financial services, traditionally the most conservative industry, leads the way in Office 365 adoption.
Microsoft is in a unique position to capitalize on the paradigm shift in computing. For years, Microsoft has dominated the workplace with its enterprise software products like Office, Outlook, and Sharepoint. The company has an advantage on reputation alone as the trusted choice of business users. They can bundle pilot cloud subscriptions into contracts, betting that businesses will inevitably make the full move.
Enterprise Accounts Supply the Hockey Stick
So far, the strategy has delivered unrivaled success in the enterprise. Analysis of over 600 companies and 27 million users revealed that one out of every five corporate employees (22.3 percent) uses at least one Office 365 cloud service, up from 6.8 percent year over year. That’s a 320 percent growth rate! These numbers make Office 365 the single most widely used enterprise cloud service by user count.
The steepest growth may be yet to come. 91.4 percent of companies have at least 100 users, meaning they most likely pay for a departmental or pilot license. As a company’s cloud program becomes more mature, they typically standardize on one or two cloud services for each function.
The SaaS market is still young, and companies in more conservative or regulated industries originally dragged their feet on moving to the cloud. Cloud adoption has reached its watershed, paving the way for company-wide deployments with user counts in the tens or even hundreds of thousands. To Satya’s credit, he has delivered hyper-growth for the tech giant once depicted as stodgy and conservative.
Are Customers Ready?
With great power over data comes great responsibility. Microsoft commits to holding up its end of the bargain by accounting for infrastructure and application security. At the same time, moving to the cloud does not abdicate all internal security requirements. Are customers aware they still share in the responsibility of the security of their data and do they have sufficient capabilities of taking action?
There is a lot more at stake than marketing spreadsheets and to-do lists. Of all files uploaded to OneDrive and SharePoint Online, 17.1 percent contain sensitive data, from confidential intellectual property to customer social security numbers. In fact, Office 365 accounts for 58.4 percent of all sensitive data in the cloud, meaning the service should be a company’s first priority for keeping corporate data safe in the cloud.
The accumulation of sensitive information indicates Office 365 has arrived as a mission-critical business application. As such, companies should be ready to implement the same controls they have for existing software: encryption, threat monitoring, and forensics, to start. Employees should be educated on how to use the service securely.
Clear and Present Danger
Yet companies today have glaring security vulnerabilities, and hackers are already targeting Office 365. The average company stores 204 files in Office 365 that contain “password” in the filename – the cybersecurity equivalent of leaving the keys under the doormat. The vast majority of companies, 71.4 percent, experience at least one threat from a stolen Office 365 password every month.
Employees cannot always be left to their own devices, as a T-Mobile employee’s theft of 1.5 million customer files illustrated. 57.1 percent of companies have at least one insider threat in Office 365 per month. Perhaps most concerning of all, nearly half of companies suffer from at least one privileged user threat per month, in which an administrator account abuses their heightened permissions.
A typical Fortune 2000 company produces over five million events of employee activity within Office 365 every month. The security team then needs to narrow this raw data down to actual threats, which average 2.7 per month. These teams already miss alerts from data breaches of existing systems, like Target’s – now they need to prepare to monitor a new system in the cloud.
Five-years in, Office 365 has proven that locked-down, regulated companies can and will make the move to the cloud. Now organizations finally recognize that cloud is more secure than the alternative. The pressure will only increase for companies to move to the cloud and embrace the new breed of workplace tools.
The challenge remains for customers to acknowledge that cybersecurity for cloud software does not come automatically. Statistics warn that in the brave new world of Microsoft’s aspirations of cloud domination, cybersecurity needs to be a priority, not an afterthought.
(About the author: Rajiv Gupta is chief executive officer at Skyhigh Networks)
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