The new suite of web applications will massively extend the reach of Office 2010, but is it enough to make businesses upgrade?
Microsoft is finally putting versions of its Office applications suite online, as part of its move to Office 2010. The new Office Web Applications, demonstrated on video, don't have all the capabilities of desktop versions, but do feature the ribbon-based user interface. They seem to be far more powerful than Google's three-year-old online applications, and should offer much better compatibility with Microsoft Office files.
The suite of Office Web Applications - Word, Excel, PowerPoint and OneNote - will be available to consumers, free of charge, as part of Microsoft's Windows Live service, which has more than 400 million users, thanks mainly to the popularity of Hotmail. However, they are not limited to Windows users: Microsoft demonstrated them running in Firefox and Apple's Safari browser.
Small businesses will also be able to use the online versions as part of Microsoft's cloud-based subscription service Business Productivity Online Suite, while large companies will be able to host them on in-house servers, as well as running desktop versions of Office. Chris Adams, an Office product manager at Microsoft UK, says it offers "the ultimate choice". Customers can decide how much they want to do on the desktop and how much online, and they can either control the service or have it managed for them.
Office Web Applications can also be used with any mobile phone that has a compatible microbrowser.
When it comes to the desktop, Office 2010 is completing the migration to the Fluent user interface introduced with Office 2007. The new versions of Outlook, OneNote, Publisher and SharePoint Server now have ribbon-based interfaces, which can be customised.
As with Windows 7, Microsoft is reducing the number of different packages. When it appears next year, Office 2010 will be offered in five versions, but only three will be available to consumers. The Office Home and Student edition comprises Word, PowerPoint, Excel and OneNote, while the Home and Business edition has Outlook as well. The Professional version also includes Access and Publisher.
Adams says the Home and Student version of Office 2007 has done well, with amazon.com selling a copy every 20 seconds. Amazon sells a three-user package for $90; it's currently £66.69 in the UK, which should be cheap enough to limit piracy.
Microsoft's Business Division, which includes Office, generated $19bn in sales in fiscal 2008, and $12bn in operating profits. There are fears that Microsoft's cash cow could lose sales to the online versions, which could account for the company's tardiness in adding a web-based Office.
But the industry analyst Tom Austin, chief of research (software) at Gartner, reckons that by introducing cloud services, Microsoft "will generate more revenue than licences alone did. Albeit, the new revenue will come at a lower profit level, but it will be incremental to the bottom line." He says "the 'free stuff' on the web is a spoiler to slow down Google's market penetration ... and a teaser" that will attract paying customers to the cloud-based offerings.
With the launch of Azure, supported by huge new data centres, Microsoft is investing massively in a move to cloud computing.
Another worry is that the online services will cut out the middleman and lead to conflict with Microsoft's partners - and Microsoft makes more than 95% of its revenues via more than 640,000 partners. While the most obvious ones are PC manufacturers, many more are employed in building applications for Microsoft products, and selling, installing, customising, managing and supporting them.
It's not a coincidence that Microsoft made its Office 2010 announcements at its Worldwide Partner Conference in New Orleans, Louisiana, on Monday - it needs to keep these partners happy.
The long-time Microsoft watcher Joe Wilcox says his first reaction to the videos of Office Web Applications was "So what? Everything's about preserving Microsoft's application stack" - the end-to-end connection of Windows and Office, back-office servers such as Exchange and SharePoint, and online services based on Azure - "and that's going to be replaced by the mobile phone going straight to the server," he says. He thinks Microsoft is "catering for old-style customers, and helping them to move forward".
To keep its "application stack" in sync, Microsoft also likes to sell new versions of Office with new versions of Windows for desktops and servers. Can Office 2010 help drive Windows 7 upgrades?
"They're not going to be released together, but that doesn't matter," says Wilcox. "Businesses are going to take a long time to test before they deploy them anyway. But I'm surprised there's not more synergy between the two, and there's no sign of it around things like the touch interface [in Windows 7]. But just because we've not heard about it, doesn't mean it's not going to happen."
If businesses started a new "refresh cycle" by installing new PCs running Windows 7 and Office 2010, a depressed computer industry would be grateful. It didn't happen with Vista and Office 2007, so many business PCs must be getting old and expensive to maintain. However, most companies are probably more concerned with reducing costs and holding on to cash, so make-do-and-mend seems more likely.
Whether the economic scene will have changed next year, when Office 2010 finally ships, remains to be seen. But Microsoft isn't the only company that hopes so.
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