Is SharePoint unstoppable, or mostly smoke and mirrors?

Guessing what eye-popping growth figures Microsoft will trumpet for its popular portal and collaboration app, SharePoint, has become an annual parlor game for fans and detractors alike.

At Microsoft's first global conference for SharePoint in May 2006, which 1300 people attended in Seattle, Microsoft said the software had 75 million licensed users.

That number grew a year later to 85 million licensed users, and generating $800 million in revenue per year.

Last year, Microsoft reported more than $1 billion in SharePoint sales along with more than 100 million users.

At its sold-out worldwide SharePoint conference this week, expected to draw 7,000 to Las Vegas, Microsoft said that SharePoint is defying the company's slump, growing more than 20% to $1.3 billion, according to corporate vice-president for SharePoint Jeff Teper.

Teper hinted that SharePoint's licensed user base may be as high as 130 million today, saying its year-on-year growth was "roughly in relation to our revenue."

Windows' replacement?

That would seems to provide compelling evidence that SharePoint is preparing to enter Microsoft's pantheon of ubiquitous platforms along with Windows and Office. CEO Steve Ballmer has called SharePoint Microsoft's "next big operating system."

It's even more impressive, considering the software's short history. First introduced in 2000 under the name "Office Server Extensions" as a tool for hosting Microsoft Office documents on the Web, the software underwent several minor name changes, reflective of Microsoft's changes in positioning against incumbent collaboration and groupware apps such as Novell's GroupWise and IBM's then-dominant Lotus Notes.

Early on, SharePoint had the reputation of being a jack-of-all-trades that, out of the box, was a master of none, said Michael Sampson, a consultant and former analyst at Ferris Research.

"In 2001, I wrote a report that said, 'Don't touch it.' In 2004, I wrote the same thing. It wasn't until 2007 that I said, 'It's good enough,'" said Sampson.

Despite the zig-zagging, SharePoint grew quickly. A year and a half after the release of SharePoint Portal Services, the software had 7 million users.

Two years later, the software, now called Windows SharePoint Services, had more than quadrupled to 30 million users in January 2005.

Eighteen months later, that number more than doubled again to 75 million users, by which time the software had a new name, Microsoft Office SharePoint Server (MOSS), with WSS kept only for the free version.

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Bundling pays off

One constant is that since 2001, Microsoft has bundled SharePoint's Client Access License (CAL) as part of its Core CAL suite, said Paul DeGroot, a licensing analyst at the independent firm Directions on Microsoft.

CALs are licenses that Microsoft requires companies to buy for desktop users of a server application. "Even though a lot of customers didn't know what SharePoint was at the time, they bought the Core CAL Suite because it included CALs for Windows and Exchange, which they did use, and Systems Management Server [now called System Center Configuration Manager], which a few more used," DeGroot said.

"So there's no question that in the early days SharePoint's 'momentum' was illusory. Many people were getting the Core CAL, and almost accidentally getting SharePoint CALs," he said.

Those buyers of SharePoint never deploy the software, turning it into shelfware. "There are, no doubt, a lot of SharePoint licenses that are, at minimum, underused," DeGroot said.

Sampson wrote a widely-read blog post in March 2008, decrying Microsoft's announcement of its 100 million users, $1 billion revenue figure.

"Licensed users does not equal real users," he said, estimating that the actual percentage of SharePoint licensees actually using the software is "more than 40% but less than 70%."

It could be even lower. An IDC Corp. 'QuickPoll' of 262 enterprise IT managers, published this month, found that an average of just 22% of corporate employees were actively using SharePoint.

Microsoft's Teper said while discussions of SharePoint-as-shelfware "might have been a valid source of discussion" five years ago, that was not so today.

"80% to 90% of the companies that have licensed SharePoint are actively using it, and the majority are using it broadly," Teper said.

He cites large enterprises with major active SharePoint deployments, including Tyson Foods (104,000 users), Kraft Foods (98,000), Coca-Cola Enterprises (72,000), oil and pharmaceutical companies Teper declined to name all with between 50,000 to 100,000 SharePoint users, and others.

Also, government is a strong user base, he said. "Most of the major military organizations around the world are avid SharePoint users," he said, including the U.S. Army, U.S. Navy, and U.S. Marine Corps.

Teper strenuously denies that SharePoint remains a "throw-in" for many companies looking for a discount.

"If you talk to customers, if you talk to the Microsoft field sales, if you talk to Steve Ballmer, they would all say that SharePoint is one of the lead dogs in any CAL licensing discussion," he said. "We do not see shelfware."

Rosier than reality revenue?

He also strongly denied a more serious charge that had been floating around the analyst community, that said Microsoft allocates discounts given to buyers of the Enterprise CAL suite mostly to products such as Windows Server, Exchange or System Center Configuration Manager, rather than to SharePoint, aiming to pump up SharePoint's revenue to demonstrate the software's momentum.

"I can't reveal accounting stuff but that is absolutely not true," Teper said.

IDC analyst Melissa Webster, who has closely studied SharePoint's sales and user ship figures, said, "I didn't believe them in the beginning, either." But after going over the discount allocation issue with Microsoft "using a very fine-tooth comb," she said she's convinced Microsoft is not inflating its SharePoint revenue.

"As a public company, Microsoft is governed by pretty darn strict laws, that have only gotten stricter," she said. Also, the product groups inside Microsoft are highly-competitive fiefdoms that are unlikely to sacrifice their sales to pump up SharePoint, she said.

Even if SharePoint's actual use today is overstated, most analysts feel the product's impact on the market isn't.

Sampson said SharePoint is a "juggernaut," while DeGroot calls it "the most successful non-core product [core being stuff like e-mail, file and print, etc.] that Microsoft has come up with."

"Microsoft may oversell its success, but that should be considered normal corporate behavior, and there is some fire underneath the smoke," he said.

"I go to a lot of places where the IT department says that SharePoint usage is just growing like a weed," said Alan Pelz-Sharpe, an analyst with CMS Watch. "So it's possible there are actually more SharePoint users than are actually licensed for it. But nobody really knows."