Although much has changed with regard to advisor technology over the last decade, one thing has remained remarkably constant: Microsoft Office among advisors. Yes, some advisors now own Macs, so perhaps they use Apple iWorks from time to time, but almost every advisor I've come across, whether he is a Mac or a PC user, owns a copy of MS Office. A growing number of advisors use Google Apps and other tools to supplement their MS Office apps, but they, too, rely on MS Word, MS Excel, MS PowerPoint, etc. for more demanding tasks.

While there is nothing fundamentally wrong with MS Office, the fact that it is desktop-based can be a constraint to the advisor or firm that wants to move to the cloud. The traditional Microsoft pricing structure can also create headaches for the typical advisory firm. If you hire a few interns or temps for the summer, do you really want to go out and purchase additional MS Office licenses, even if you will only need them for a limited period of time? Don't you wish there were an MS Office alternative better suited to the needs of your firm? Well, perhaps there is.

Microsoft recently unveiled Microsoft Office 365. This new offering is the MS Office you are familiar with, delivered through the cloud. As such, it includes a business class server and security backed by Microsoft. With Microsoft Office 365, advisors can access documents, calendars, e-mail and Web conferences anywhere, anytime.

Microsoft offers three versions of Office 365. The base plan, for professionals and small business, is suited for companies of approximately 25 employees without an IT staff-in other words, the vast majority of independent RIA firms. According to the 365 Web site, this version is available for as little as $6 per user, per month. As we shall see, it will cost a bit more for advisors to get the suite they are most likely to need.

For larger firms, Microsoft offers the Mid-sized Businesses and Enterprises plan. These plans, labeled plans "E1" through "E4," start at $10 per month. The "E" plans offer more advanced services such as active directory integration, advanced e-mail archiving, 24/7 administrative support and full enterprise voice capabilities on the premises. Again, for the tools an advisor is likely to need, you'll pay a bit more, but the good news is that you only pay for the functionality that each employee needs, and you can provision or de-provision tools in real time as your firm's needs evolve.

The third version, for educational institutions, is of little interest to financial advisors.

I initially tried out the base offering for professionals and small businesses, and, as I suspected, this is the one most individual readers would likely be interested in. The offering has a great deal of appeal, but those hoping to replace their desktop versions of MS Office 2010 with a fully functional online version for $6 per person, per month will be disappointed.
The core $6 offering consists of four components: Microsoft Office Web Apps, plus hosted versions of Exchange, SharePoint and Lync. The behavior of Microsoft Office Web Apps depends somewhat on your software configuration. If you do not have a local version of MS Office installed (MS Office 2007 or 2010 for Windows; MS Office or MS Office 2008 or 2011 for Mac), you have access to limited versions of MS Word, MS Excel, MS PowerPoint and MS OneNote.

The limited versions may be sufficient for some home users or as a supplement for advisors on the go, but it is no replacement for MS Office. The Word app has serious limitations. To name just two: It can't track changes and it does not provide document protection. The Excel app only provides a small subset of the full program's features. The PowerPoint app is also bare bones. You can create a very simple presentation on it, but pretty much all of the features under the design tab, the animation tab, the slide show tab and the review tab, as well as many others, are missing from this version. I did not work enough in OneNote online to come up with a full comparison, but like the rest of the offering, it offered the basics without the more advanced features.

For those of you unfamiliar with Microsoft Exchange, it is a server-based product that is hosted, in this case, on Microsoft servers. MS Exchange provides e-mail hosting that can be accessed online using the MS Outlook Web App, or through a local (or cloud-based) version of MS Outlook. Exchange also provides an address book (contacts), individual and group calendaring and instant messaging. Many advisors are currently either maintaining their own in-house Exchange server or paying a third party to host Exchange for them, so this should be familiar territory.

SharePoint is a hosted group team site. It provides a facility for members of your firm to collaborate. SharePoint allows you to store documents and collaborate on them. It can be used to store company documents, including user manuals, policies and procedures, etc. Documents can be organized into libraries. This requires users to check out and check in documents, which facilitates tracking document changes and provides an audit trail of who has accessed a document and when he or she has accessed it. You can track team events projects and even host a discussion board on a SharePoint site.

With Lync Online, an integrated communications tool, you can instant message co-workers and colleagues, create PC-to-PC audio and video calls and initiate online meetings. In addition, Lync Online allows users to share their desktop with others, display online whiteboards and display online presentations. Click-to-communicate functionality makes it easy to connect with users of Office 365, Windows Live and Windows Live Messenger.

If you already own up-to-date MS Office applications for your staff, the base version is appealing because the MS Office 365 suite integrates very nicely with your existing apps. For example, you can upload a document or spreadsheet you've created so the rest of your colleagues can access it. If you have accessed the basic cloud version of an app, you can later download it, enhance it and upload it back to the cloud.

If you do not have MS Office, or if you have an old version and are looking to upgrade, the enhanced professional and small business package, at $15 per month per user, looks appealing. This package offers all the functionality of the $6 package, plus the full desktop version of Microsoft Office Professional Plus 2010, provisioned through your firm's Office 365 administrative Web site. This includes Microsoft Access 2010, Excel 2010, InfoPath 2010, OneNote 2010, Outlook 2010, PowerPoint 2010, Publisher 2010, SharePoint Workspace 2010, Word 2010 and Lync 2010 (available as a separate download).

This package allows you to benefit from a Microsoft hosted environment (Exchange and SharePoint), the online meeting and communication tools, plus the opportunity to rent MS Office as you go, on a monthly basis if you need it. If you add or subtract employees, you can provision or de-provision users on the fly.

The only downside with this functionality is that it only offers MS Office Professional Plus, which is more than many employees might need. It would be nice to see Microsoft offer a more limited Office suite, perhaps Word, Excel, PowerPoint and Outlook, at a lower monthly price.

If one of the two plans for professionals and small businesses does not meet your firm's needs, one of the four plans for midsize businesses and enterprises may. Generally speaking, the enterprise plans offer added sophisticated functionality.
For example, all four enterprise plans include advanced administrative capabilities and support active directory integration.
All also include license rights to the onsite deployment of Exchange Server, SharePoint Server and Lync Server. Some of these extras will appeal to large firms with their own IT departments that choose to keep some data in house, but not to smaller RIAs. The top plan (E4) even includes enterprise voice capabilities with an on-premises Lync server. This plan costs $27 per user per month, a lot when compared with the Professional plan, but reasonable if you can use all of the functionality it provides.

There are some tools only available to Enterprise subscribers that may interest advisors of all sizes, however. For example, advanced archive capabilities, unlimited e-mail storage and hosted voice mail are included in the $24 (E3) and $27 (E4) packages. One of these packages may serve as a substitute for a third-party e-mail archiving service advisors are currently using. The E3 and E4 packages also include advanced capabilities for rich forms, data visualization with Visio Services and the publishing of simple databases through Access Services.

One thing we have not yet discussed is site administration. When you set up an Office 365 account, at least one person must act as the administrator. For the Professional site, someone reasonably conversant with computers should be able to manage fine, even if they have no network administration training. I signed up for the service, provisioned a few users, upgraded to the Office Professional Plus version and provisioned Office Professional Plus to users without any trouble at all.
Fully customizing the workspace will probably require reading documentation and watching some video tutorials, however. Each 365 account comes with a Web domain, but if I were going to keep the 365 account I've set up, I'd want to purchase a distinct domain to use with my account. This is a task some readers can easily handle; other will need help.

Unfortunately, as you move from the Professional plans to the Enterprise plans, the administration can become a bit more challenging. I did not run a trial on the Enterprise plans, but if you plan on making use of active directory integration, rich forms or many of the other enterprise features, you will likely require help setting them up and perhaps administering them. The silver lining here is that all of the functionality offered comes from standard Microsoft products, so there should be no shortage of capable third parties providing support for Office 365.

Speaking of third parties, there is already a Microsoft Office 365 Marketplace online (exchangeonline.pinpoint.microsoft.com) that contains a listing of service providers who can set up, customize and enhance your Office 365 installation. Providers are listed by business need (sales, marketing, security, etc.), industry focus and the type of service offered (deployment, system integration, etc.).

Although Office 365 is still in its infancy, it could be an attractive option for financial advisory firms of all sizes. For small firms, the ability to get hosted MS Exchange accounts, hosted SharePoint, Lync and a limited but functional Web-based version of MS Office that can be self-administered for as little as $6 per month per user sounds very attractive. The ability to rent the latest version of MS Office 2010 monthly is also appealing, and it would be more so if there were other versions of Office for rent at a lower price.

For many larger advisory firms, the ability to get rid of your Exchange servers plus the hardware and other costs associated with the equipment is compelling. Microsoft commissioned a study by Forrester Research entitled "The Total Economic Impact of Microsoft Office 365."

This study is based on a composite of seven midsize firms Forrester studied in depth. The composite firm employs 150 people and uses a full range of MS Office 365 features. Forrester concluded that the three-year, risk-adjusted ROI from an Office 365 deployment was 321%. The net present value per user was $5,936. Even if you take these findings with a grain of salt and discount them by 50% or 75%, that is still an impressive ROI.

In spite of the compelling ROI projections, it will probably take a while before a significant number of advisors migrate to Office 365. Whether you embrace it today or not, however, we do believe it behooves advisors to become familiar with technologies of this sort. As advisory firms continue their slow but steady migration to the cloud, offerings such as Microsoft Office 365 will no doubt play a role. As the product matures and additional options are added, advisors may find that Office 365 is a better fit for them than the alternatives they employ today.