What is Microsoft Office 365 cloud? It is Microsoft’s subscription service for office software: your email, your files and the web versions of Word, Excel and PowerPoint run on Microsoft’s servers, while the desktop apps you install on each computer check in with those servers to keep their license active. Since April 21, 2020, Microsoft’s small business plans that used the Office 365 name have been sold under Microsoft 365 names, so for most small businesses the two names describe the same service.

In this guide

• What Microsoft Office 365 cloud means
• Office 365 vs. Microsoft 365
• What runs in the cloud and what runs on your computer
• Where your files and email are stored
• Frequently asked questions
• The bottom line
• Setting it up for your team

What Is Microsoft Office 365 Cloud, in Plain Terms?

It helps to think of it as two parts that work together. The first part is a set of online services: business email through Exchange Online, file storage in OneDrive and SharePoint, chat and meetings in Teams, and Office for the web. Microsoft describes Office for the web as a way to open Word, Excel, OneNote and PowerPoint documents in your web browser. Nothing gets installed for any of these. You sign in and use them.

The second part is the familiar desktop apps. Depending on the plan, each person can install Word, Excel, Outlook and the rest on their own computer. Those apps run on the computer the way Office always did, but the license is managed through the cloud instead of a product key printed on a card.

So is Office 365 cloud based? Yes: the account, the email, the files and the licensing all live with Microsoft. Only the desktop software does its work on your computer, which is why Excel can look exactly like the version someone bought years ago.

Office 365 vs. Microsoft 365: What Changed and What Didn’t

On March 30, 2020, Microsoft announced that its Office 365 business plans would take Microsoft 365 names starting April 21, 2020. In Microsoft’s announcement, the company said it was “a change to the product name only, and there are no pricing or feature changes at this time.”

Watch the Business Premium row. If an invoice from before April 21, 2020 said “Office 365 Business Premium,” that same plan is called Business Standard today, and the plan now called Business Premium is a different bundle.

The Office 365 name did not disappear completely. Microsoft’s own documentation still refers to enterprise plans such as Office 365 Enterprise E1 and E3. For a small business, though, a conversation about Office 365 cloud today is almost always about a Microsoft 365 business plan.

Tip: If you have a Microsoft invoice from before April 21, 2020, match the plan name on it against the table above to find today’s name.

What Runs in the Cloud and What Runs on Your Computer

The split is simple: the services run on Microsoft’s servers, and the desktop apps run on your device. Here is how the two sides compare, based on Microsoft’s service description for Office for the web and its licensing documentation for Microsoft 365 Apps.

Many everyday tasks, like writing a letter or updating a shared spreadsheet, work fine in a browser. The desktop apps matter when someone depends on a specific feature, like a mail merge for client letters or a workbook built around macros.

The 30-day rule is easy to miss. Microsoft’s licensing documentation says the desktop apps stay fully functional as long as the computer connects to the internet at least once every 30 days. After that, they drop into what Microsoft calls reduced functionality mode, where people can view and print documents but can’t edit them or create new ones. The same thing happens when an admin removes someone’s license, which is handy when an employee leaves.

Activation happens through Microsoft 365 cloud services too, so there are no product keys to track down when a new laptop arrives.

Where Your Office 365 Files and Email Are Stored

Your business data lives in Microsoft’s data centers, not on a server in your office. Email sits in Exchange Online, files saved to OneDrive or a SharePoint site sit in Microsoft’s storage, and Teams keeps its chats and shared files there too. That’s what Office 365 cloud hosting means in practice: Microsoft runs the hardware your data sits on.

You don’t have to guess which region holds your data, either. Microsoft’s data location documentation points admins to the Data Location card in the Microsoft 365 admin center, which shows where data is stored for your specific account.

Files on a computer are a different story. A document saved only on a laptop, outside OneDrive or SharePoint, has no copy in the cloud if that laptop is lost or stops working. Usually the fix is a simple habit: shared work goes into a SharePoint site, and each person’s own work goes into OneDrive.

Note: Storing files in Microsoft 365 and keeping a separate backup are two different things. Check how deleted files are recovered on your plan, and read our guide to what Cloud 365 means for small businesses to see what happens to your data if a subscription lapses.

Office 365 Cloud: Frequently Asked Questions

The Bottom Line: What You Need to Know About Office 365 Cloud

• Office 365 and Microsoft 365 usually mean the same thing. Microsoft’s business plans took Microsoft 365 names on April 21, 2020.
• The services live in the cloud. Email, OneDrive, SharePoint, Teams and Office for the web run on Microsoft’s servers.
• The desktop apps still run on your computer. They keep working offline for a while, and their license is checked online.
• The web apps handle many everyday tasks. Features like mail merge and Excel macros still need the desktop apps.
• Files only reach the cloud when they are saved there. Anything kept only on a laptop stays on that laptop.

Setting Up Office 365 Cloud the Right Way for Your Team

Choosing a Microsoft 365 cloud plan comes down to how your people work: who needs the desktop apps, who can work in a browser and where each team’s files should live.

• List who uses mail merge, macros or other desktop-only features.
• Check which plan you pay for today and what it is called now.
• Confirm that shared files live in SharePoint or OneDrive, not on one person’s laptop.
• Decide who removes licenses when someone leaves.
• Check how deleted files and expired subscriptions are handled on your plan.

CFL Technology Source works as the outsourced IT department for small and mid-sized businesses in Orlando and Central Florida, with on-site and remote IT support that includes Microsoft 365 Cloud Applications. You can see what that covers on our Microsoft 365 Cloud Applications page, or find more guides in the Cloud and Microsoft 365 section of our blog.

Featured photo: CoWomen on Unsplash.