Office.NET—Not Your Father's Office

For many people, the word "Microsoft" is synonymous with "Windows," but the truth is that the company derives almost half of its revenues from the Microsoft Office suite of productivity applications. Office made more than $10 billion for Microsoft in fiscal 2000, just ahead of Windows, which came in around $9 billion. (And here's a sobering thought for Microsoft's bottom line: When you combine the revenues from every other product the company makes, the total amounts to just about $4 billion.) So it should come as no surprise that Microsoft wants to maintain the market for its Office applications going forward to the NET future. In fact, this desire for backwards compatibility is what separates the .NET vision from competing schemes from Sun, Oracle, and others. Microsoft has an established base—dare we say "legacy market"—that they need to consider.

But when we think about traditional Office desktop applications and NET's "software as a service," the two concepts don't seem to have much in common. It's easy to picture certain Web-based services, such as weather bulletins and eWallets, but how can Microsoft expect users to run Word remotely over the Internet every time they want to write a letter or answer an email? The answer to this question is a bit obvious: It doesn't. Instead, Microsoft is working on improving the traditional Office suite while secretly plotting a different kind of Office suite that's more suited to the online experience.

Microsoft President and CEO Steve Ballmer described it very simply during his address at Forum 2000, where the company expanded on its plans for .NET. "This is a long-term transition," he said. "I'll just highlight that. We're going to be selling copies of Microsoft Office for many, many years. This is not a quick transition perhaps, but this is the direction of transformation that we're describing." Microsoft has at least two more iterations of Office—currently codenamed Office 10 and Office 11—up its sleeves. It will release Office 10 before the middle of next year. Bob Muglia, then group vice president of the .NET Services Group, described it this way: "First of all, in the short run we've been working on the next version of Office, and you can expect to see a traditional version of Office with Word, Excel, and PowerPoint as a part of it. And, in fact, we expect to continue to work on traditional versions of Office for quite some time, because our customers will want us to do that."

I think the issue here, literally, comes down to ownership. Users like the idea of owning Office or any other software application. They like having a CD-ROM that they can put their hands on. I compare this to the banking industry in the 1980s, when ATM machines became common. Older customers were intimidated by these devices and wanted the human interaction that came with meeting a teller to conduct business. On the flip side, many people saw the ATM machine as the death of the teller, and although teller numbers have probably dwindled in relation to the number of customers, tellers are still a core part of customer service at banks today. I suspect the traditional Office applications will fill this role for years to come as well, even as Microsoft moves to what Ballmer calls "a service that is the follow on to Office."

That service—or more likely, that group of services—is Office.NET. Currently part of the "NetDocs" project, Office.NET is being developed separately from Office, and by a different group of people. Mr. Ballmer says we'll see the first version of this product in 2002 or 2003. So while Office 10 (and 11) seek to satisfy the more traditional user, Office.NET will provide similar functionality via services over the Web. The Office team isn't that excited about the NetDocs group, incidentally. "Everybody wants to be the lead dog," Microsoft CEO Steve Ballmer told the Wall Street Journal. "But we need to lead on multiple fronts." As I wrote in WinInfo UPDATE previously, the NetDocs group was formed in 1997 amid customer complaints that Office was getting too big and unwieldy. But the fruits of its labor probably won't see the light of day for a few more years. "\[NetDocs\] is not a product," Muglia said about the semi-secret project. "There's nothing for somebody to buy here. We're public about things we have a reason to be public about."

Muglia expanded on the notion of the competing Office suites at Forum 2000. "But as we move forward with Office, we will be incorporating .NET technology into it and at the same time we'll be working on a totally new version," he said. "You can think of it as Office.NET, or Office that's delivered as a software service. And with that version we can take advantage of the full capabilities of the .NET platform, things like the natural user interface, smart clients and smart services, the universal collaboration, and the full set of mobility and freedom and control scenarios."

One bit of NetDocs technology has already been demonstrated in alpha form: the so-called "universal canvas." The universal canvas works like a Web browser but lets the user perform any operation, including word processing, Web browsing, email, and document management. Like many features of Office, the universal canvas will likely become a feature of Windows.NET over time.

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