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Microsoft Feeling the Office Licensing Pinch

Years ago, as I downloaded floppy disk images of an up and coming new operating system called Slackware Linux to my Windows 95 PC, I rhetorically asked a colleague how Microsoft would respond if the open source community ever supplied a credible Microsoft Office challenger at little or no cost. Back then, the only major challengers to Office were similar products--with similar price tags--from Corel and Lotus, making Microsoft's suite a pretty obvious choice: After all, which company could make a more integrated product than the one that made the underlying operating system?

Regardless, the question remained: What would happen if some entity--a company, individual, or group of programmers--cloned the 10 percent of Office that most people actually used and then offered the product to the public for free or for significantly less money than Microsoft Office? Over the past eight years, this question has remained largely theoretical despite the fact that such products did appear in, its commercial brethren Sun StarOffice, and several other open source products. And since 1995, it seems that Office's biggest competitors have been Microsoft Works, a freebie often given away with new PCs, and older versions of Microsoft Office, which continue to work just fine. Office competitors of the past, such as Corel WordPerfect Office and Lotus SmartSuite, have been largely pushed aside by Microsoft's largely unheralded but most dominant product line.

Over the past year or so, however, the situation has subtly changed. After the lackluster Office XP release, I recall listening to a presumably reinvigorated Jeff Raikes, the Microsoft Group Vice President in charge of Office, explain how he was going to pump Office products full of new features and value that would make consumers and businesses alike want to upgrade to Microsoft Office 2003. But when the betas appeared, they were basically very similar to previous versions, with a few new applications, some interesting new features, and a slightly altered user interface. In other words, Microsoft Office remains great, but it also remains a mature product with little room for improvement. This means that there is precious little reason to upgrade, especially given the high price of the product. For customers, it's increasingly obvious that Microsoft Office has worn out the welcome of its premium pricing. There are cheap alternatives now, they work well, and heck, Office 2000 still works fine too.

And this change is the big difference between now and 1995: We have compelling Office alternatives as before, but now they are significantly cheaper than Microsoft's offering, which has, in many ways, only barely improved in the intervening years. Companies and consumers are therefore, for the first time, probing the waters of Office alternatives and now, for the first time, I'm getting an answer to my rhetorical question from eight years ago. Microsoft has responded by introducing a low-cost Office version for students, teachers, and their families; by easing corporate licensing terms; and by lowering the retail price of Office for all users. In one amazing concession, the company is even allowing users to install employer-bought Office products at home, not just so they can work from home, but so they can use it for personal use as well. This act alone should cause systems all around the world to be magically upgraded to the latest Office version, a feat that would previously have been described as software piracy.

In other words, the software giant's only weapon at this point is momentum. By making Microsoft Office too good of a financial deal to pass up, the company hopes that its customers will stop thinking about and evaluating the competition. And I have to think this strategy will work just fine. After all, now as eight years ago, Microsoft still makes the best and most integrated office productivity suite, and if we can get it for next to nothing, the choice is obvious.

On a related note, I'd like to see how Microsoft responds to a similar challenge facing its curiously dominant Web browser, Internet Explorer, which hasn't had a major feature update since 1998. Despite the fact that superior products such as Mozilla, Opera, and Safari are available to consumers, often for free, the majority of Web surfers still use IE, a product that lacks such basic necessities as pop-up ad blocking and tabbed window support. Most curious is the way in which Microsoft has remained silent about IE: Is there an IE 7 version planned, and if so, what are its features? Or is the non-free MSN Explorer browser, with its panoply of integrated MSN services, the future? I don't know, and right now, Microsoft isn't talking. But IE is as much a liability to the company as is Office, and I think it's time for the software giant to step up to the plate and tell us what the heck it's doing.

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