Microsoft is sending out email notices to subscribers about changes ahead for Microsoft Online Services, the service providing hosted Exchange mailboxes for many of my clients. Let me give you some background to understand those notices.

Later this year Microsoft Online Services (aka “Business Productivity Online Suite”) will get a new name, Microsoft Office 365. Expect a huge promotional push. Microsoft is trying to stay ahead of Google in the emerging market for hosted business services and will use Office 365 to demonstrate that it is still nimble enough to be a step ahead of the competitors.

From Microsoft’s perspective, the big money is in midsize and large companies and government agencies, so the new services will have a lot to offer to companies that have an in-house IT staff. Although prices will be dirt cheap (less than current prices for BPOS), it’s less clear that very small businesses will use many of the bundled services beyond the Exchange mailboxes they have now. Here’s the formula:

Start with: Cranky business owners and senior partners that don’t want to change

Plus: fierce learning curve

Plus: no onsite IT staff to hold hands and act as cheerleader

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Equals: Stacked odds against very small businesses adopting Sharepoint and Lync

When the time comes, I’ll have more details about all the new services, and specific instructions for all my clients. For now, let me just give an overview of how things stand today for Microsoft Online Services subscribers in very small businesses and law firms.

• Nothing is going to happen quickly. The service does not go live until later this summer. Microsoft’s plan is to require current BPOS subscribers to migrate within a year after Office 365 is rolled out.
• Start using passwords for Microsoft Online Services that are at least 8 characters long. Something about the new architecture requires it, so you might as well get in the habit now. But note that today’s email was unnecessarily alarming unless you read it really carefully – there is no imminent risk that your password will stop working.
• There is a possibility that I will finally be able to set your passwords to never expire after we migrate to Office 365, but that’s unconfirmed so far.
• You may also see references to “single sign-on”, where the password you type in to log into your computer is kept in sync with Office 365, so you don’t have a separate mail password. That would be very welcome! And the answer so far is, maybe. It requires some infrastructure in your server closet and the details are hazy about that, too.
• Begin planning for the demise of your computers running Outlook 2003. When you upgrade to Office 365 (as you’ll be required to do, sooner or later), your mailboxes will be hosted on Exchange 2010, with some new features that you will like very much. For better or for worse, the service will be designed to prevent Outlook 2003 from connecting to it at all. You’ll have the option to buy Office 2010 for those computers, but that might not be the right answer. A computer running Outlook 2003 is probably six years old and at the end of its life. It’s always frustrating to be forced to upgrade but this summer might be the time to replace the last few dying Dell Dimension 2400s under the desks of your lowest-ranking employees.
• If you’re lucky, Office 365 will complement the new server you get to replace your aging Small Business Server 2003 server. A few months ago I wrote about Small Business Server 2011 Essentials, a new onsite server that will integrate seamlessly with the online hosted services. Since then, SBS 2011 Essentials has been released but without the integration bits. As of now, no one has seen what that might look like and it’s not even available for testing. A lot of you have SBS 2003 servers clinging to life, showing signs of age. If SBS 2011 Essentials and Office 365 play nicely together, it may be a great combination.
• Look forward to the new service. At the least, you’ll appreciate the redesigned look of Outlook Web Access. With luck, even small accounts will be able to use a new archiving feature in Exchange 2010 that eliminates the need for confusing .PST archives. Heck, if you want to dream, then imagine that you completely change your business processes to rely on Sharepoint Online for document storage and collaboration. There’s a lot there for businesses that survive the transition.

Begin to watch for references to Office 365 but don’t worry yet – we will have a lot of time to prepare and we’ll see it coming from a long way away.