Helm said Microsoft started with Windows because those sales are tightly tied to the overall PC sales rate. "However, Office is such a huge part of Microsofts business that its the logical next product to try new models on," he said. "Having had a couple of years of experience with Windows, Microsoft has now made the leap to the next product." Microsoft is also aware of the many threats posed to its business by competitors such as open-source software and Google, and many of these initiatives are designed to make its products as pervasive as possible in the potential growth markets of the future.Asked about the threats to Microsofts business from companies like Google, with its hosted applications, as well as from open-source software and products available under subscription, Chris Capossela, corporate vice president of Microsofts business division, said the company takes all of these seriously. "A couple of years ago, we were faced with the threat of a free product, a free clone of Office, and that was and still is a huge threat. Now, it was only free because the license was free. There are also so many hosted Web productivity applications that it is hard to keep track of them all, but they are all competitors," he told eWEEK in a recent interview. Having software accessible on the Web is a different value proposition, so these are all interesting things that Microsoft is keeping track of, Capossela said. "We have to look at them and determine if we have a better value proposition to business customers, governments and educators, but that does not change the fact that our biggest challenge is upgrading older versions of Office," Capossela said. However, he added, Microsoft is always looking at what else it needs to do to be innovative and to best meet customer needs. "We absolutely look at offering Office in every flavor and shape and sizeyou name the distribution and usage vehicle. Were constantly monitoring and assessing whether it makes a lot of sense," he said, pointing to Outlook local, Outlook Web Access and Outlook voice access as the model in this regard. Click here to read more about how Google took a swipe at Microsoft Office. "That is the best example and we will look to do that same type of stuff with every application that we have. We have already done a lot of this with Office through SharePoint and were constantly looking at what we should be building. But we dont think its about just having every delivery mechanism covered. There has to be a value proposition, and where there is a customer problem that a competitor is solving that we havent, that needs to be solved," Capossela said. This is also not the first time Microsoft has sold Office under a subscription model. In May 2001, the company launched the Office subscription program for the professional and small business packages of Office XP as a pilot in Australia, Brazil and New Zealand. Office XP subscribers basically rented Office for a specified period of time, during which they also received automatic updates as part of their licensing terms. In a June 2002 eWEEK interview with Steven Sinofsky, then senior vice president of Office at Microsoft, he said the company was always experimenting with different ways companies could acquire its software, with different product variants, different levels of functionality and different mechanisms of purchase. "We tried this in countries like Mexico, Brazil, New Zealand, Australia, Peru and Italy. There was a desire for a low cost of entry for the product but with all the features. We have thus tried some pilots around subscriptions, which gives a low cost of entry and you pay for it over time. Were still in the midst of learning from that as you have to go through at least one renewal cycle, which is coming up this summer, when we will learn more and decide if this is a model we want to expand on and move forward with," Sinofsky said at the time. But Microsoft did not like what it learned. In September 2002, the company decided that the world was not ready for buying Office via subscription, based on customer feedback that found subscriptions a less-than-optimal method for buying Office. Microsoft stopped the program, and those companies participating in the subscription pilot received a replacement copy of Office XP. If that subscription pilot had been successful, Microsoft was slated to make Office available worldwide on a subscription basis. Check out eWEEK.coms for the latest news in desktop and notebook computing.
To read more about how Google threatens Microsoft, click here.