Microsoft News Tracker

After Microsoft corporate VP Satya Nadella let the cat out of the bag last week, Microsoft’s PR folks belatedly came up with a statement yesterday revealing a pilot for a new free, ad-supported version of Works called Microsoft Works SE 9:

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Last week, Mary Jo Foley interviewed Satya Nadella, Corporate Vice President of Microsoft’s Search & Advertising Platform Group, who revealed that Microsoft Works 9 would be free and ad-supported. This was apparently a shock to the rest of Microsoft since Microsoft Works 9 is currently offered on their web site for $39.95 or less (although it isn’t in stock at the retail partners listed), the demo shows no ads, and the Microsoft PR crew is saying “no comment.”

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After months of speculation, Google is expected to announce today that they have rolled up their collection of Web office suite applications and are offering the package as a hosted service to businesses:

Having won over millions of consumers with its online search and productivity tools, Google is now looking to displace Microsoft as the desktop application provider of choice in corporate America by offering a range of low-cost, zero maintenance software that office workers can access through the Internet.

Google Apps Premier Edition, to be unveiled Thursday, features online e-mail, calendaring, messaging and talk applications as well as a word processor and a spreadsheet. The launch follows Google’s introduction of a similar suite aimed at consumers last August. The new Premier Edition, however, offers enhancements aimed squarely at corporate environments.
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Specifically, Google Apps Premier Edition features application programming interfaces that businesses can use to integrate it with their own applications. Ten Gigabytes (10GB) of storage for ad-free Gmail is offered standard, meaning workers can spend more time working and less time cleaning out their in-boxes. And Google is offering service level agreements that promise 99.9% uptime and 24×7 tech support.

But possibly the most compelling aspect of Google Apps — at least from the standpoint of potential customers considering a switch from Microsoft products — is the price. Google is offering the whole package for just $50 per user, per year. Microsoft does not publish volume licensing prices for the Enterprise Edition of Office 2007, its latest entry in the office productivity market. The price of a standalone copy of the Professional Edition is $499.

This was anticipated ever since Google took the first steps in that direction last year, but as might be expected when one of Microsoft’s leading cash cows is threatened, the pundits are out in force. To net out a lot of the commentary (and my observations from the past), online offerings in general and Google’s in particular are not as full featured as Microsoft Office but may just be “good enough” for many users and also have the advantage of simplified file sharing. Google also currently lacks a presentation package to match Microsoft’s PowerPoint.

Some perspective from Adam Lashinsky at Fortune:

Google’s tiny enterprise group already has been marketing a free version of the package to small businesses, and it claims 100,000 users. What’s new is an expanded version for $50 per account per year that includes telephone support and 10 gigabytes of storage capacity, compared with the 2 gigabytes that come for free with a Gmail web-based e-mail program.

Though Google is targeting small businesses - the kind whose IT departments don’t manage giant e-mail systems - it has signed up General Electric and Procter & Gamble for small trials.
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Google’s enterprise ambitions are modest. It’s unlikely to dislodge more than a fraction of the 450 million users of Office. Even a rousing success would barely move the needle for Google. If all 100,000 of its current users signed up, for example, it’d mean an additional $5 million in annual revenue.
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Still, that Google even cares to try to sell a product against Microsoft in its core area of expertise speaks to Google’s ambitions - as well as its yearning for revenue streams that go beyond advertising. According to Dave Girouard, the vice president for Google’s enterprise group, the productivity package will be profitable at $50 a year. Many corporations pay about $600 a year for employee e-mail, he says, and half the employees in the U.S. don’t even have an e-mail account.
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None of that is any reason not to try, of course. When Google dramatically increased the storage capacity of Gmail its competitors were forced to follow suit. Whether or not its new package is successful, this could force a dramatic cost reduction in the expense of corporate e-mail programs.

And I’d add “reduction in the expense of corporate office suites in general,” which in the short term may be the biggest effect on Microsoft.

Update: It’s now been formally announced - Google Introduces New Business Version of Popular Hosted Applications.

Google just launched the latest iteration in their free online office offerings called Docs & Spreadsheets. Separately they already had the Writely word processor (relaunched in August) and were testing Google Spreadsheets, but now they have combined them (dropping the Writely name) and Michael Arrington at TechCrunch got a sneak preview:

It integrates the previously separate Writely and Spreadsheet product silos into a single control panel and admin area (the previous sites for those products redirect to docs.google). This is not a deep product integration, but it is another shot across the bow of Microsoft Office. I had an unexpected opportunity to meet the team and take a look at the product earlier today along with a few other bloggers.

The new site shows all of a user’s writely and spreadsheet documents in a single list, but integration goes no further for now. The interfaces and features of the two products have also been mostly mirrored to provide a consistent user experience. For example, chat previously available only on the spreadsheet product, is now available when working on a writely document as well.

Notably absent is the ability to embed spreadsheets directly into writely documents, a feature already offered by Zoho, which has been furiously updating its own office suite (Google says this feature is coming).

The Zoho links are worth noting since there are other players in the online office game. Yesterday we saw that Steve Ballmer’s biggest concern about the Google YouTube acquisition seemed to be that it would help to subsidize free online office software and while Microsoft may trot out free online Microsoft Works to play too, either option cuts into the lucrative Microsoft Office revenue. Yes, there are functionality limitations in all the online offerings compared to full boat Microsoft Office, but as always the question is how much function the bulk of the users really need, plus the attraction of the online offerings’ trump card and possible danger point: the ease of sharing.

Back when Google started rolling out its online office tools, I observed that all the criticism that online tools lacked the power of Microsoft Office were missing the point:

If I had to pick a product to compare the Google collection to, I would vote for Microsoft Works. It’s light duty office functionality for the occasional user and so are Google Spreadsheets, Writely, and Google Calendar. I can easily see OEMs at some point foregoing a Microsoft Works bundle on a consumer PC and just pointing them to the Google office offerings.

We haven’t quite reached that blissful state yet, but Microsoft seems to be seriously thinking about moving in that direction by making Microsoft Works an online service under Office Live according to Jay Greene at BusinessWeek Online:

Microsoft, which scoffed at the rise of online alternatives to Office, isn’t looking the other way anymore. BusinessWeek has learned that the software giant is developing a strategy to put some of the technology from its Works software—the barebones word-processing and spreadsheet program that often ships with new consumer PCs—at the heart of a new online offering.

The company is working on plans to offer a free version hosted on its Office Live Web site, as well as a subscription flavor with more bells and whistles. While it’s not a done deal, the company is throwing a lot of manpower at the project. “It’s not a small number (of people working on the project) to be sure,” says Chris Capossela, vice-president for Microsoft’s Business Division Product Management Group. “This is core. We want to win this space.”

Microsoft is still working out the details for its online offering. And nothing will likely be decided until after its flagship productivity software, Microsoft Office 2007, ships early next year (see BusinessWeek.com, 11/18/05, “Microsoft’s New Word: Accountability”). But after that, Microsoft will likely put tweaked versions of the Works spreadsheet, word-processing, and project management programs on the Web.

So much for Microsoft’s disdain for limited function Web office products. As the rest of the article makes clear, Microsoft Works isn’t particularly lucrative and offering it on the Web might be a better way to turn a buck plus add the multi-user sharing that is the boast of all the Web Office tools. However, Microsoft Office is still the cash cow in the living room and no one wants to upset the milk flow.