Microsoft Office 365, The Cloud, And Legions Of Hackers

Microsoft (NASDAQ: MSFT) launched its new cloud product, Office 365. Many of the business clients of the world’s largest software company no longer want Office to run on their PCs and servers. These customers want something more like Google (NASDAQ: GOOG) Apps which runs on remote servers paid for by the search company. Other firms which target businesses have been cloud-based for some time. Perhaps the best-known is SalesForce.com (NYSE: CRM). But, companies from Oracle (NASDAQ: ORCL) to SAP (NYSE SAP) have large numbers of cloud-based products.

As Microsoft CEO Steve Ballmer released the new Office 365 he didn’t mention the degree of security that cloud computing offers, or in some cases does not offer at all. It should matter a great deal. Hackers have broken into server farms used as the backbone of the “cloud.” The most notable may be the hack made of Amazon (NASDAQ: AMZN) servers to take down the Sony (NYSE SNE) PlayStation Network. There are a number of reports that say the Amazon Web Services servers Sony uses were the route that malicious programmers took.

The art of hacking has moved well ahead of the security that keeps hackers at bay. Observers only need to look at the way the Citibank (NYSE: C) customer data base was attacked or how the computers of Lockheed Martin (NYSE: LMT), the largest defense contractor in America, were targeted.

Microsoft faces the irony that the “old” versions of Office, which ran on the dedicated PCs and servers of its customers, may keep data more secure than cloud-based solutions. It is an argument that Microsoft could use for businesses to avoid the cloud and Google’s products. But, the search company and other companies have used the cloud to rob Microsoft of its clients. Redmond can hardly speak out of both sides of it mouth to sell Office and Office 365 at the same time. And, that may be Microsoft’s largest challenge. Its most secure product may be one that fewer and fewer businesses want.

Douglas A. McIntyre