According to the release, Adobe’s popular desktop tools — Illustrator, PhotoShop, InDesign, Dreamweaver and Premiere Pro — will be rebranded as part of the new Creative Cloud SaaS offering and carry a CC label (e.g. Illustrator becomes IllustratorCC).

For anyone in the media business –including yours truly — this is a huge milestone. Nearly every publication relied on Illustrator to create artwork, and PhotoShop to tweak and touch up (occasionally rebuild) photographs. InDesign contended with Quark as the page layout and production software of choice.

According to a company statement:

“While Creative Suite 6 products will continue to be supported and available for purchase, the company has no plans for future releases of Creative Suite or other CS products. This update to Creative Cloud includes the next generation of Adobe desktop applications — including Photoshop CC, InDesign CC, Illustrator CC, Dreamweaver CC and Premiere Pro CC.”

Adobe Systems is not facing this cloud dilemma alone. Microsoft is trying to ride the wave while offering Office 365 subscription while continuing to update its legacy Office desktop versions.Who knows how long that will last.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• NewNet Q4: Platform mania and social commerce shakeout
• NewNet Q4: Platform mania and social commerce shakeout
• Quality of the cloud: best practices for ISVs

The sales figure was made by Curt Anderson, who heads up finances for Microsoft Server & Tools business unit, in a Bloomberg report.

The gist, with my emphasis added:

“Microsoft’s $1 billion sales figure includes Azure, as well as software provided to partners to create related Windows cloud services, Anderson said in an interview. Azure customers use the services to run corporate programs, websites and applications from Microsoft’s data centers, rather than spending on their own servers, storage machines and workers to maintain them.”

Update:  Interestingly, in a response emailed Monday night, a Microsoft spokewoman said the $1 billion sales figure includes “Windows Azure and revenue from service providers such as Amazon, Rackspace and others. (Again, the emphasis is mine.) Since neither Microsoft nor Amazon has responded to a request for comment, let’s examine the possibilities. That phrase “software provided to partners” probably means Microsoft is lumping in sales of on-premises software. It could also include Office 365 sales. Office 365 provides functionality that used to be relegated to shrink-wrap software via a software-as-a-service model.

An executive with a company that works with both Amazon and Microsoft said the latter is moving personnel from Office to its SaaS platform. “It’s a great thing but it’s hardly net new revenue or anything like what Amazon is doing with IaaS,” he said. I have followed up with the spokeswoman to see if Office 365 is part of the overall sales number. Amazon had no comment.

Microsoft launched its Infrastructure-as-a-Service competitor to AWS two weeks ago. Up until now Azure was pretty much a platform-as-a-service game and thus not directly competitive with AWS. That’s all changing now, which is probably why Microsoft is beating the drum about Azure momentum.

It’s not surprising that vendors play games with their sales numbers. What would be a shocker is if Microsoft — or any big cloud services provider — explicitly broke out what those sales numbers really include. That includes Amazon, which buries its cloud services sales number in a broader category that includes promotional and marketing activities. For its most recent quarter, that group logged $750 million in sales.

AWS is the uncontested leader in public cloud infrastructure — by its own and everyone else’s account. It recently claimed that its S3 storage service is home to  2 trillion objects. Last July, Azure said it stores 4 trillion objects. And, given Microsoft’s investment in Azure, you’d be foolish to rule it out.

Of course, another competitor, Google Compute Engine (GCE) looms. I’d expect Google to announce public availability of the service — introduced last June — at Google I/O next month.

To hear more about Microsoft’s cloud plans, be sure to check out GigaOM’s Structure Conference in June where Microsoft cloud chief Satya Nadella will speak.

This story was updated at 4:21 a.m. PST with Microsoft comment and Amazon’s non-comment.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Quality of the cloud: best practices for ISVs
• Amazon’s DynamoDB: rattling the cloud market
• A field guide to cloud computing: current trends, future opportunities

All things considered, however, Microsoft had a pretty good quarter — with profit of $6.06 billion, up a healthy 18.5 percent from a year ago. Not bad for a company that’s been slammed for missing the smartphone and tablet revolution. It shipped Windows 8 in November as part of its bid for credibility in these new form factors, but the OS met with mixed reviews. On the call, Microsoft CFO Pete Klein (who will leave the company at the end of the fiscal year) noted the challenge:

“There is no doubt that the device market is evolving. Consumers and businesses are increasingly shifting their focus to touch and mobility, and as a result, they want touch-enabled computing devices that are ultrathin, lightweight, and have long battery life. While Windows revenue has been impacted by the transition from the traditional PC to a new era of computing devices, the overall addressable markets are growing, and we are excited by the opportunities ahead of us.”

He reiterated that it is moving to an “accelerated pace for updates and innovations” starting with Windows 8 to meet the challenge.” Klein also said Microsoft’s big investment in cloud is starting to pay off with broader adoption of Office 365, which delivers including Word and Excel functionality as a service. “One in four of our enterprise customers now has Office 365, and the business is on a $1 billion annual revenue run rate,” Klein said.

Some on Twitter noted that in a dismal economy Microsoft managed to post pretty impressive profit growth. Maybe that means folks will stop calling for Microsoft CEO Steve Ballmer’s head. But then again, maybe not.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Tablet market to hit over 377 million units by 2016
• A Media Tablet Forecast, 2011 – 2015
• How tomorrow’s mobile-centric data centers will look

Folks who think companies should keep applications running on premises will doubtless point to these snafus as proof that running cloud services is a fools errand. But how many people running on-premises e-mail have not had similar issues? Speaking as someone who used to rely both on Lotus Notes and then Exchange Server run by my employers, I can attest that outages happen much more than companies admit. The big difference is those internal email meltdowns don’t get covered by every tech news outlet on the planet.

Now, here’s more cloud news from the week

Amazon’s cloud business grows and grows

Somewhat lost amid the news about Wall Street blithely dismissing Amazon.com’s(a amzn) missed earnings targets was this gem: Revenue from Amazon Web Services (or at least the category of which AWS is a part) rose 68 percent year over year for Amazon’s foutyh quarter. Revenue from the category hit $769 million, up from $459 million for the year-ago period. As for profitability? That’s anyone’s guess.

Microsoft adds another data analysis option

Microsoft added – SiSense and its Prism data analytics prowess — to the big data analytics options available on its Azure platform-as-a-Service. Prism can run on-premises or in the cloud offering customers mix-and-match deployment options, according to CRN. Prism offers automatic ETL (data extraction, transform, load) capabilities from SQL Server, Oracle, MySQL, PostgreSQL, QuickBase databases and Salesforce.com, Google Adwords, Google Analytics, Google Spreadsheets, Zendesk and QuickBooks applications as well as Hadoop and Hive, according to a SiSense statement.

This news came days after Microsoft announced an expansion of its Windows Azure Store which is now available in 11 markets worldwide. Microsoft corporate VP Scott Guthrie announced the news along with new services available from the store, in a blog post.

Tier 3 names Schiltz CEO and president

Tier 3 CEO Matthew Schiltz

Cloud services startup Tier 3 named Matthew Schiltz as its new president and CEO. Schiltz was previously CEO of Symform and before that of DocuSign and CourtLink. That means that Jared Wray, founder and CTO of Bellevue, Wash.-based Tier 3 who had been acting CEO, can get back to the CTO and chief architect roles he relishes.

“Matt was our top CEO target. He brings the key strategic and operational leadership needed to guide Tier 3 as we deliver the most complete enterprise cloud management platform available” Wray said in a statement.

Other cloud news from around the web

Here are some of the stories from other news outlets:

• Analyst Louis Columbus wraps up the latest cloud forecasts and estimates in Forbes.
• The Fedora open source project now backs MariaDB database rather than MySQL as its database of choice, according to ZDnet.
• Rackspace certified three reference architectures designed to accelerate deployment of its OpenStack-based private cloud in enterprise accounts, according to Data Center Knowledge.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Cloud computing infrastructure: 2012 and beyond
• A field guide to cloud computing: current trends, future opportunities
• Infrastructure Q1: IaaS Comes Down to Earth; Big Data Takes Flight

I suspect the Office 365 outage is related to making the "new" Office 365 plans available to current subscribers.—
Ed Bott (@edbott) February 01, 2013

More here from  Neowin.net and Engadget and ZDnet.

This snafu — which appears to be resolved — comes a few weeks after a Hotmail and Outlook outage. Microsoft resolved that issue in a day,  although judging from comments on GigaOM’s January 8 post, the problems persisted for some users.

This has been a bad week for a lot of online services, with both Twitter and Amazon.com (no not AWS — Amazon.com) experiencing glitches yesterday. But Microsoft faces unique issues as it tries to move more of its productivity applications revenue over to a subscription-based SaaS model without denting its juggernaut on-premises Office business. The growing popularity of Google Apps makes this a particularly pressing issue for Microsoft.

RT @mvanhorenbeeck All in all, the #Office365 issues got solved relatively quickly. <- Indeed. One hour orso?—
Dave Stork (@dmstork) February 01, 2013

Microsoft has been contacted for a comment. Story will be updated when they get back.

Update: According to a statement emailed by a company spokesman:

“Some Microsoft services experienced a short-term issue as a result of a networking adjustment. We worked quickly to roll back the adjustments made and all services are now restored to normal.”

This story was updated at 11:00 a.m. PDT with Microsoft comment.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• NewNet Q4: Platform mania and social commerce shakeout
• NewNet Q4: Platform mania and social commerce shakeout
• Quality of the cloud: best practices for ISVs

AllThingsD reported Tuesday that Microsoft wants to bring its productivity suite to Apple’s App Store, but it doesn’t care for Apple’s standard 30 percent revenue sharing model:

[T]he companies are at loggerheads not over the 30 percent commission Apple asks of storage upgrade sales made through SkyDrive, but over applying that same commission to Office 365 subscriptions sold through Microsoft Office for iOS, which is expected to launch sometime next year.

Microsoft’s Office apps for iOS are said to be free, but Office 365 will be one of the key components that makes the apps useful. “On first launch, a Microsoft account will provide access to the basic viewing functionality in the apps. Word, PowerPoint, and Excel documents will all be supported, and edit functionality can be enabled with an Office 365 subscription,” the Verge reported last month.

So, if this is still the case, Apple won’t get a cut from the app itself because it’s free. It’s the subscriptions — to Office 365 and/or SkyDrive — where Microsoft will be making money.

Microsoft is apparently trying to get Apple to take less than 30 percent of that subscription fee. Apple takes 30 percent of all app, content and subscription sales made through its App Store, whether it’s magazines, books, newspapers, music, games or services, like Office365, which is Microsoft’s cloud-based productivity suite. The report indicates Apple is “not at all willing to negotiate” on this. (This explains why someone at Microsoft went public with at least part of the dispute; a possible negotiating tactic.)

In any case, it’s not clear why Apple would bend on this, especially now that the scenario is public. If the company starts making exceptions for anyone it probably won’t be long before more developers try turning the iOS app approval process into a bartering system.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Analyzing the wearable computing market
• NewNet Q4: Platform mania and social commerce shakeout
• NewNet Q4: Platform mania and social commerce shakeout

This change indicates that Google is treating Apps for Business as a real business  albeit a tiny one compared to the company’s huge search operation. According to a Wall Street Journal report  the company sold $1 billion worth of Google Apps for Business last year — a contention Google would not confirm. That amount is itty bitty compared to the multiple billions Microsoft earns on its Office juggernaut annually but is still a respectable number if true. For its FY 2011, ending last June, Microsoft Business Division — which includes Office –  generated $21.99 billion in revenue.

At Google I/O in June, Google said it had 5 million Google Apps business customers but did not break out paid versus unpaid.

The news of changes to the Google Apps sales plan was posted on the Google Enterprise blog late Thursday. According to the post, people wanting to keep using freebies can create personal accounts for Gmail and Google Drive. But even small businesses may opt Google Apps for Business for $50 per user per year, in return for which they get phone support, 25 GB of storage and service level agreements of 99.9 percent.

It’s unclear what impact, if any, Microsoft’s cloud-based Office 365 is having on Google Apps adoption. Update:  And interestingly, IBM which bought Lotus, along with its Office-wannabe SmartSuite years ago, is apparently back in the game, according to InformationWeek. 

IBM SmartCloud Docs, according to that story is:

“available for $3 per user, per month, as an add-on to SmartCloud Engage Standard and the IBM Connections networking platform. IBM also added new features, such as enhanced presence awareness, to its SmartCloud for Social Business service.”

Note to IBM:  SmartCloud Engage Standard? SmartCloud for Social Business? Let’s do something about these names or neither Google nor Microsoft will have much to worry about.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• A near-term outlook for big data
• Quality of the cloud: best practices for ISVs
• What Enterprise Software Vendors Could Learn from the Consumer Space

This could be a huge deal: Most researchers see China as a huge potential market for cloud services. As Doug Hauger, GM of Microsoft’s Server and Tools business, pointed out in his blog post announcing the deal, Forrester Research estimates that the public cloud market in China will soar to $3.8 billion in 2020 from $297 million last year. But doing business in China can also be highly problematic, given the issues Google and other U.S. tech companies have had there. The latest skuffle came when China shut off citizens’ access to the New York Times, following that paper’s expose last week on the personal finances of Chinese premier’s Wen Jiabao’s family.

Amazon Web Services, the world’s largest public cloud purveyor, has EC2 Asia Pacific coverage in Tokyo and Singapore and edge locations in Osaka, Hong Kong, Singapore and Sydney.

Update: A Microsoft spokeswoman emailed to say that Office 365 will also be available in China via two channels. For customers wanting a local source, the online productivity applications will also be available via 21Vianet. Others can source Office 365 through Microsoft data cetners in Singapore and Hong Kong. More here from the Office 365 blog.

According to that post:

“The Shanghai government also announced today that it will adopt both the Office 365 and Windows Azure services from 21Vianet once they are available.”

It was not clear when that will be.

 Feature photo courtesy of Flickr user brandnliu

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Forecasting the future cloud computing market
• There is more to Node.js than buzz
• Quality of the cloud: best practices for ISVs

According to Cloud Sherpas, there is plenty of money in that market — the Atlanta-based Google partner says its Google Apps-related revenue more than doubled year to year. And it’s brought on Chris Arroyo, former VP and CFO at Capgemini as CFO to help it attack more of that big-business opportunity.

There’s a lack of objective numbers on sales of Google Apps and rival Microsoft Office 365, but one thing is clear: Companies don’t want to pay a ton for productivity applications — a market dominated by Microsoft Office for years before coming under attack by less expensive (and less feature-rich) software-as-a-service offerings like Google Apps.

Atlanta-based Cloud Sherpas was Google’s Enterprise Partner of the Year in 2011, so it’ s hardly a neutral observer here, but it’s claims nonetheless bear noting. The company said it logged $12 million in revenue last year on Google Apps and $10 million on Salesforce.com and this year expects  to hit $45 million in total revenue across both businesses. Even discounting its merger last year with GlobalOne, a Salesforce.com partner, that’s impressive growth.

Cloud Sherpas CEO David Northington

The vast majority of new Google Apps customers are coming from Microsoft, although some are also transitioning from Lotus Domino, Novell Groupwise, or open source products, said Michael Cohn,  Cloud Sherpa’s SVP of marketing.

Google Apps undoubtedly gets traction among cash-strapped startups — younger companies that are less tied to Microsoft’s apron strings. But, Cloud Sherpas CEO David Northington, said he sees enterprises adopting Google Apps at a nice clip. “The real push is in the enterprise space and we’re in the middle of that,” he told me last week.

The battle of the SaaS upstarts

Google Apps can be had for free but the “business” version lists for $5 per month per user or $50 per user per year, considerably less than the list price of old-line Microsoft Office. Microsoft has since responded with  Office 365 which starts at $4 per user per month for email, but the version with desktop productivity applications lists for $20 per user per month.

But those are all “list” prices — that don’t take into account discounting that can be rampant when an enterprise account is at stake.

“We do see Microsoft in [enterprise] accounts and when they win it’s by heavily discounting [Office/Office 365] and rolling it into enterprise agreements that are predicated on buying more legacy software and [client access licenses],” Cohn said. That strategy has worked to devastating effect for Microsoft in the past, pushing huge adoption of SharePoint and Microsoft CRM, example.

Cohn said he doesn’t think Microsoft can replicate that past success with Office 365, however. “Office 365 has cloud elements but it more a hybrid that remains tied into Microsoft on-premises software. When companies move to Google Apps, it’s their last migration. They won’t have to deal with upgrades every 3 or 4 years,” he said.

Cloud Sherpas isn’t alone in claiming Google Apps adoption gains. Last week,  BetterCloud, a company that offers IT services around Google Apps and Google Drive and (using technology acquired from Cloud Sherpas)  said it has added 10,000 users in the last year bringing its total to 2.75 million users.

Wanted: a SaaS applications ecosystem

That traction seems to indicate that Google, which is at heart an internet search and ad company, is starting to “get” that it needs an ecosystem of  third-party VARs and integrators to tie its SaaS applications into legacy software and other SaaS products.

Last week, Google announced a Google Apps Reseller API that lets authorized partners more easily place orders and manage Google Apps accounts. The new API supports Google Apps for Business, Google Drive storage, and Google Apps Vault.

Cohn said there are several ways an integrator can thrive in this low-cost SaaS world. First, Cloud Sherpas gets margin on the upfront sale and a continuing piece of the ongoing revenue from Google Apps.  Beyond that, it can integrate SaaS applications from different vendors with each other and to older on-premises software. “We can provide our customer with a single place to consolidate their service level agreements [SLAs] and track users. We can also enhance their applications and carry them to mobile devices and adapt them for vertical applications,” he said.

Feature art courtesy of Shutterstock user Raywoo

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Quality of the cloud: best practices for ISVs
• A near-term outlook for big data
• The future of India’s IT services

The latest round brings total funding to about $95 million and was led by private equity firm, Insight Venture Partners, with existing investor Dawn Capital also participating. This new cash brings total funding to a robust $95 million for the London-based company.

CEO Peter Bauer clearly sees opportunity beyond email archiving and collaboration to run on the company’s infrastructure ”Our top priority is R&D — we started building our platform in 2003 and now are ramping up the number of applications  to run on it,” he told me this week. Bauer thinks there are lots of interesting things that use all that unstructured data from email.

Mimecast plans to expand sales and marketing  – including building out the company’s channel partner roster especially in North America. Bauer also plans to double the company’s North America staff from the current headcount of 80, he said. US operations are based in Waltham, MA.

The company claims 6,000 customers including the Boston Celtics and has a particularly strong presence in law firms where proper email archiving is critical.

A few months ago, Bauer spoke to me about email fatigue — a problem Mimecast intends to address — and what it means for businesses.

“You hear about companies like Volkswagen switching off email after hours [to keep employees from burning out.] Many say there’s information overload problem with email and end users have expectations based on things like Facebook and LinkedIn,” he said.

“A lot of what they’re saying is right but the response is wrong … In reality email has to adapt  to meet new needs and be more collaborative in a way inspired by social networking. Email is the anchor tenant in how collaboration evolves. Email has such substantial adoption, penetration, network effects — the kids who have sidestepped email haven’t had a job.”

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• A near-term outlook for big data
• Quality of the cloud: best practices for ISVs
• NewNet Q2: Google closes the quarter with a bang