Tuesday, July 14, 2009

Selling Boxed Software Is Just So Yesterday !

Microsoft is finally planning to offer a free web version of Office in response to Google.

Microsoft provided new details of a plan to offer a free, Web-based version of its Office software, the latest acknowledgment that the company's decades-old model of selling boxed software is fading fast.

The free online offering -- ready in the first half of 2010 along with a new version of its conventional software called Office 2010 -- is the latest milestone in an 18-month-old strategy by the world's largest software supplier to offer more of its core products on the Web.

The nearly ubiquitous Office applications include Word for word processing, the Excel spreadsheet, PowerPoint for presentations and Outlook for email.

By offering lightweight versions of those products that can be used through a Web browser, Microsoft is trying to exploit the popularity of online services without curtailing the profitability of products that are still run on PCs or corporate servers (Good luck, guys !).

It is also hoping to blunt competition from Google, which offers free online applications called Google Docs and last week disclosed plans for an operating system that could compete with Microsoft's Windows, initially on low-priced portable computers called netbooks.

Microsoft, for its part, is trying to muscle in on Google's core market: Internet search advertising. Last month, Microsoft launched a new search site, called Bing, which has drawn more users though Google's service retains a big lead. Microsoft is also working on another project, code-named Gazelle, that is a hybrid of an operating system and Web browser.

Microsoft doesn't break out Office sales, but the products account for the bulk of the $19 billion in sales posted by its business division in fiscal 2008. Stephen Elop, who runs the division, said in an interview that making some of its Office products available free should help the company expand its overall business.

A key advantage of Web-based programs is that they can allow users to tap into their files from any device connected to the Internet, including hardware running non-Microsoft systems such as Linux.

Businesses may like the fact that Office Web avoids the need to install security patches and other labor-intensive support chores, says Roger Kay, an analyst at Endpoint Technologies Associates. "At the enterprise level, this could be quite attractive," he said.

Microsoft, which first confirmed last October that it would launch a free Web offering, said it would be available to consumers through its Windows Live online service.

Businesses can use Office Web through their existing volume licensing programs for Office, or purchase new subscriptions, the company said. It didn't disclose pricing for paid versions of the offering.

Vic Gundotra, Google's vice president of engineering, called Microsoft's announcement "a powerful validation" of the Web.

Before joining Google, Mr. Gundotra was general manager of Microsoft's developer outreach efforts. "I think we will look back on today as a phenomenal day when the Web has won," he said.

By Jessica Hodgson, WSJ, 7-14-09

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