Microsoft July 13 charged across the battle line Google, Zoho and other Web-based collaboration software makers drew with Office Web applications, browser-based versions of the company’s word processing, presentation, spreadsheet and note-taking applications.
The Office Web suite includes Word, PowerPoint, Excel and OneNote, and is a key subset of Office 2010, which Microsoft released to technical preview today along with SharePoint Server 2010, Visio 2010 and Project 2010 at its Worldwide Partner Conference in New Orleans.
Office Web comes at a crucial time for Microsoft. While the company commands a dominant 90-percent-plus share over the software market for on-premise-based productivity applications — apps that users install on their individual computers — Google, Zoho and a raft of others have been convincing consumers and businesses alike that SAAS (software as a service) apps hosted by the software providers is the key to the future of office computing.
More than 1.75 million businesses use Google Apps, which includes word processing, spreadsheet and presentation applications along with collaborative parts such as the Google Sites wiki and Google video for businesses. This momentum forced Microsoft to answer with Office Web.
Office Web ups the ante even further because it allows for three distribution options, according to Takeshi Numoto, corporate vice president of Microsoft Office. First, Microsoft is offering the suite free through its Windows Live service, which boasts 400 million users.
But the key differentiator for Microsoft lies in its options for enterprises. The company will offer Office Web as a hosted solution via Microsoft Online Services, where customers can purchase a subscription, or as an on-premises solution for the 90 million existing Office volume licensing customers, allowing these companies to host the Web apps on their own servers, Numoto told eWEEK. Microsoft is not announcing pricing for these options at this time.
“A lot of customers are thinking about moving to the software-plus services value proposition that we have, but a lot of the customers aren’t ready to move to the cloud in all one shot,” Numoto said. With this option, customers can wet their beaks in SAAS with Office Web without putting their business data at a software provider’s mercy.
Google was unimpressed with the Office Web delivery choices. A Google spokesperson told eWEEK it “welcomed Microsoft to the cloud,” a dig at the software giant’s perceived slowness to offer online versions of its popular software. Google first packaged Google Apps as a suite for businesses in February 2007. The spokesperson told Eweek:
“Businesses have clearly stated that they want to move to the cloud to unshackle from the bonds of traditional on-premises software, both in their data centers and on their PCs, to free their IT resources from the burden of buying and installing servers, maintaining up-time, updating software, and patching security holes. Choice is good for users, and their direction further validates that the future of computing is in the cloud. We continue to hear from customers that they desire hosted, multi-tenant, true-cloud solutions, not incremental steps. “
Will Office Web Cannibalize Microsofts Core Office Line?
With respect to Google’s cavalier response to Microsoft’s move, allowing businesses to host the Web applications on their own servers for their employees could bust barriers to SAAS adoption. Some enterprise customers have been reticent to move to Google Apps, Zoho or other SAAS collaboration suites because they feared relinquishing control of their sensitive business data to software vendors.
Forrester Research analyst Sheri McLeish agreed this is a valuable competitive differentiator for Microsoft.
“Absolutely – businesses like to retain control of their content, especially in more risk averse industries like financial services,” McLeish said. “Microsoft’s approach lets the business decide how they want to provide web access for their information workers, which will appeal to many businesses that may have been hesitant to cede control of their content.
Moreover, McLeish expects Google and Zoho to follow Microsoft into self-hosting to beat back a company she sees eating into its rivals’ SAAS shares. “As they continue to mature their apps and enterprise strategy they will need to address this desire for control and flexibility.”
Still, as much as the two enterprise delivery options provide alternatives to Google and Zoho, Microsoft’s move into Web-based applications is a risk for the company, McLeish acknowledged.
Microsoft is used to charging some $150 for compact disks containing Office applications Word, PowerPoint, Excel and OneNote; delivering free Web-based versions of the software could kneecap those sales. In effect, Microsoft isn’t just competing with Google and Zoho — it’s competing with Microsoft.
Zoho CEO Sridhar Vembu agreed, telling eWEEK in an e-mail:
“How far do they want to go with their online offerings? They clearly recognize the risk – almost $16 billion in revenue (and almost the same in gross profit) is involved here, one of the largest franchises of software. We do not believe the $16 billion in revenue/profit is defensible, but our guess is that Steve Ballmer does not want to be the CEO who gives that news to shareholders.“
Vembu further argued that while Microsoft is just getting its productivity feet wet online, Zoho will work on integrating its SAAS collaboration tools into its business applications for CRM, business intelligence and project management.