Microsoft Pays Customer $250,000 To Adopt Office 365Microsoft Pays Customer $250,000 To Adopt Office 365

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The University of Nebraska is mothballing its aging IBM Lotus Notes email and calendaring system in favor of Microsoft's Office 365 cloud platform for a number of reasons, including access to newer technology, greater flexibility, and operational savings.

And one other big reason--the university will receive $250,000 in givebacks from Microsoft to underwrite the switch under a little-known program Redmond calls Business Incentive Funds.

"That funding will pay for some consulting and licenses to convert a large percentage of our users from Lotus Notes to Office 365," UNL officials said in a Q&A about the email migration that was posted on the university's website. "We will also use that funding to pay for a Microsoft Premier Support agreement covering email and Microsoft Office applications for the entire university."

The university plans to move all students and faculty to Office 365, which Microsoft formally launched last week, over the next 12 to 18 months. The lone exception is the University of Nebraska Medical Center.

School officials said they're not convinced the cloud can meet the security and privacy standards required under the Health Insurance Portability and Accountability Act (HIPAA).

Microsoft doesn't talk much publicly about its Business Incentive Funds program, but the money is available to partners, resellers, and customers in cases where a little, or, in the case of Nebraska, a lot of extra incentive is needed to get a signature on a contract.

To win Nebraska's business, Microsoft not only had to beat out incumbent IBM, which offers a cloud-based version of Notes, it also had to outbid Google, which pitched its Google Apps service to school officials. The university said the decision came to down to Microsoft or Google, both of which "offered a superior Web-based interface and enhanced capabilities" over Notes. In the end, "Microsoft was able to provide a more competitive pricing structure than Google," the officials said.

The university said the move from Notes to Office 365 will cut its annual email operating costs by about 50%, from $1 million to $500,000. Add in the $250,000 in funds from Microsoft and the deal looks even better.

The University of Nebraska's package is the latest sign that Microsoft is willing to use its financial clout, and sacrifice margins, to edge Google out of key accounts. It's also a measure of how important the company views the emerging cloud market. Though Microsoft still makes the vast majority of its revenues and profits from the sale of conventional desktop and server software, it does not want to fall behind the curve in cloud the same way it was caught napping when other new tech markets, such as mobile computing and search, suddenly took off.

In terms of actual sticker prices, it's difficult to compare Office 365 and Google Apps. Google offers a business package that starts at $5 per user, per month and includes access to standard email and productivity tools plus enterprise class security features like Postini. Microsoft offers a broad range of pricing packages for Office 365, from $2 per user, per month for basic email, to $27 per user, per month for a full range of software and support, including the full, client version of Office, Office Web Apps, and technical support.

With Office 365 now formally launched, it's likely Microsoft will continue to be aggressive when it comes to negotiating contracts for new government, educational, and commercial accounts. Last year, New York City officials said the vendor offered significantly lower prices than Google on a bid for the city's cloud computing contract. The upshot for customers: As Google and Microsoft battle each other for the cloud, there may be no better time to buy.

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