Office 365 Hits 100 Million Users. On Course for 120 Million This Year

Posted on April 28, 2017 by Tony Redmond in Office, Office 365 with

More Than 100 Million Active Office 365 Seats

The last time Microsoft commented formally, they claimed 85 million active monthly Office 365 users in October 2016. On their April 27 analyst call to discuss their Q3 FY17 results, CEO Satya Nadella said that the new number is “more than 100 million monthly active users.”

In other words, Office 365 has gained over 15 million new users over the last two quarters, or 2.5 million new users each month. If Microsoft maintains this rate, Office 365 will have close to 120 million active users by the end of calendar 2017.

Achieving the Run Rate Goal

That’s good progress, but there are still many on-premises seats for Microsoft to harvest. Not all these seats are yet happy to move to the cloud, but there should be enough to allow Microsoft to meet its goal of a $20 billion annualized run rate by the end of June 2018.

Yesterday, Microsoft said “Our commercial cloud annualized revenue run rate now exceeds $15.2 billion.” To put that number in context, that’s an extra billion-plus over the number last quarter. Five billion more is needed over the next five quarters to reach the $20 billion goal, so Microsoft is moving at the right pace.

Where Office 365 Growth Will Come From

To return to the question of moving on-premises seats to the cloud, in response to a question from Brad Sams on April 10, Microsoft VP Jeff Teper said that SharePoint is now used by more than 200 million people spanning over 200,000 organizations. Although the customized nature of some SharePoint deployments can make it harder to move organizations from on-premises SharePoint to SharePoint Online, the much easier administration and management of SharePoint in the cloud has accelerated its progress.

In addition, the way that SharePoint Online is used as a document management service by new Office 365 applications like Groups and Teams means that more people use SharePoint without realizing it.

Combined with the 350-plus million Exchange user base, it seems clear that Microsoft has a lot of room to grow Office 365. The number of Exchange seats is my estimate based on numbers that I have gathered over the years. It is lower than some estimates, but I prefer to be cautious and think it is a reasonable number to use here.

No one knows exactly what overlap exists between Exchange and SharePoint on-premises. My feeling is that the two applications co-exist in roughly half of all large deployments of Exchange and less in smaller companies.

To debate the question, let’s say that 100 million users are shared by both applications, so the total of unique users is around 350 million. I think that a lot of Office 365 growth has come from moving Exchange mailboxes into the cloud since 2011 and that the pace is now quickening for SharePoint.

It is likely that some 250 million Microsoft on-premises seats remain as targets for Office 365 growth. In addition, Office 365 is vacuuming up the last remnants of Lotus Notes, Novell GroupWise, and other mail systems. And anecdotal evidence that I have heard from customers is that an increasing number of migration projects from Google Apps (G Suite) to Office 365 are now in motion. (Here’s one article on the topic from a London-based company).

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Why Office 365 is Growing

The impact of new applications like Teams is probably a factor, but it is more likely that companies are assessing:

  • The performance and stability of Office 365 since June 2011.
  • The investment Microsoft continues to make to build out its datacenter and network infrastructure for Office 365 and Azure. Microsoft launched their 13th Office 365 datacenter region this month in South Korea.
  • The rapid development cadence that results in new applications and the closure of gaps needed by customers such as the ability to recover Office 365 Groups, availability of Skype for Business PSTN numbers and PBX replacement in more countries, and the wide range of mobile apps for Office 365.
  • The relative lack of new features (compared to their cloud counterparts) appearing in the on-premises versions of servers like Exchange and SharePoint.

Overall, the message is that the cloud is stable, it is where the action is and what Microsoft is investing in for now and the future. And that is why Office 365 is gaining 2.5 million new active users per month.

Follow Tony on Twitter @12Knocksinna.

Want to know more about how to manage Office 365? Find what you need to know in “Office 365 for IT Pros”, the most comprehensive eBook covering all aspects of Office 365. Available in PDF and EPUB formats (suitable for iBooks) or for Amazon Kindle

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