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Office generations

September 14, 2006

This is the first in a series of occasional commentaries on the future of corporate IT.

In the wake of the popular embrace of the buzzword Web 2.0, the suffix "2.0" has become an all-purpose signifier of putatively revolutionary newness. It's hard to pin down exactly what it means to be 2.0 - which is one of the suffix's main attractions - but the term seems to denote a software program or a software-based service that has two qualities: (1) it is delivered over the internet rather than installed on local machines, and (2) it facilitates the collaborative creation of some sort of product. To get any more specific than that is probably unnecessary and almost definitely futile.

For businesses, one of the more intriguing of the recent coinages is "Office 2.0." That term is being used, with increasing frequency (and, naturally, decreasing specificity), to describe a new generation of personal productivity applications - the would-be successors to the component applications of the ubiquitous Microsoft Office. Office 2.0 applications are delivered as services over the internet, running in most cases within the user's web browser. Many such "web apps" are already available, ranging from Google's Writely word processor to Dan Bricklin's wikiCalc spreadsheet program to Zoho's Show presentation creator. They are, by design and necessity, much simpler than traditional "desktop apps," and because they run on the internet they are in many ways (though not in all ways) more conducive to collaboration among many users. They are also, in general, easier to integrate with other popular Web 2.0 formats and tools such as tags, wikis and blogs.

Because of the centrality to the white-collar world of Microsoft Office, which has expanded to encompass email and calendar programs as well as various other components, a major shift in the nature of personal productivity applications would have far-reaching implications for companies and their IT vendors. So it's worth taking a hard look at the state of the Office market and its likely evolution. First, though, it's necessary to debunk "Office 2.0." Though not without a few important grains of truth, the term is misleading, a red herring in effect if not intent. First, by suggesting that we're now seeing the first generational shift in personal productivity applications (PPAs), it oversimplifies the history of office software, obscuring past developments that can help illuminate the future. Second, it jumps the gun. We're still a generation away from the adoption of purely web-based PPAs.

If I had to summarize the generations of office software, here's how I'd do it:

Office 1.0 (1980s): a set of discrete and often incompatible applications for word processing, spreadsheets, presentation creation, and simple database management. Archetype: Lotus 1-2-3.

Office 2.0 (1990 - present): integrated suites of PPAs, with expanded, if still limited, collaboration capabilities. Archetype: Microsoft Office.

Office 3.0 (present - early 2010s): hybrid desktop/web suites incorporating internet-based tools and interfaces to facilitate collaboration and web publishing.

Office 4.0 (c. early 2010s): fully web-based suites.

It's been widely assumed, among the tech-forward Web 2.0 crowd, that it will be the end users who will drive the adoption of purely web-based office apps - and that corporate IT departments will be the obstructionists. I think it will actually play out in the opposite way.

Whatever the flaws of Microsoft Office, most end users are comfortable with it - and they have little motivation to overturn the apple cart. What is absolutely unacceptable to them is to take a step backward in functionality - which is exactly what would be required to make the leap to web PPAs today. Web apps not only disappear when you lose an internet connection, they are also less responsive for many common tasks, don't handle existing Office files very well, have deficiencies in printing (never underestimate the importance of hard copy in business), and have fewer features (Microsoft Office of course has way too many, but - here's the rub - different people value different ones). Moreover, many of the current web apps are standalone apps and thus represent an unwelcome retreat to the fragmented world of Office 1.0. Finally, the apps are immature and may change dramatically or even disappear tomorrow - not a strong selling point for the corporate market.

What will be attractive to end users - at least a sizable number of them - is to extend the usefulness of the traditional office suite through the addition of web-based tools and interfaces. The key is to extend both functionality and interoperability without taking away any of the capabilities that users currently rely on or expect. Reducing interoperability or functionality is a non-starter, for the end user as well as the IT departments that want to avoid annoying the end user. You screw with PowerPoint at your own risk.

What we're entering, then, is a transitional generation for office apps, involving a desktop/web hybrid. This generation will last for a number of years, with more and more application functionality moving onto the web as network capabilities, standards, and connectivity continue to advance. At some point, and almost seamlessly, from the user's perspective, the apps will become more or less fully web-based and we'll have reached the era of what I call Office 4.0 (and what others currently call Office 2.0). Driving the shift will be the desire of companies, filtered through their IT staffs, to dramatically simplify their IT infrastructure. Mature web-based apps don't require local hardware, or local installation and maintenance, or local trouble-shooting, or local upgrading - they reduce costs and increase flexibility. These considerations are largely invisible to end users, but they're very important to companies and will become increasingly important as the IT world shifts to what might be called utility-class computing.

Those who look to "Office 2.0" to destroy the dominance of Microsoft Office are likely to be sorely disappointed. In the absence of widespread user disgruntlement, Office isn't going anywhere - and Microsoft's fledgling Live services have a strong natural advantage over most contenders. That doesn't mean that everything's going to be rosy for Microsoft. Even during this transitional period, the company is going to find it harder and harder to maintain the traditional pricing and upgrade models that have made Office such an enormously lucrative franchise. Those models have been crumbling for some time, and as PPAs steadily become more like services and less like products, they're going to collapse altogether. The collapse will begin with small and medium-sized businesses, which have the most to gain and the least to lose from moving quickly to a software-as-a-service model, even for PPAs, and it will roll upward to larger companies from there. Microsoft sees this coming, and one of its biggest challenges in the years ahead will be figuring out how to replace the revenues and profits that get sucked out of the Office market.

As for the many Office 2.0 companies that are popping up, most are doomed. Some, though, may find nice niche markets - consumers who need to do a specific task, inveterate Microsoft haters, tech tinkerers, tiny companies and nonprofits, educators - or carve out a role, at least temporarily, as a complement to the hybrid version of Office. But don't expect today's Office 2.0 contenders to make meaningful inroads in the mainstream business market, at least not anytime soon.

In the near term, the software-as-a-service companies with the greatest opportunities in the enterprise market are those looking to replace applications that traditionally run on servers rather than those looking to replace applications that traditionally run on personal computers. But that's another story.

UPDATE: The Bb Gun offers an interesting, and even more conservative, take on the subject, pointing out that it's a mistake to assume that office apps are fundamentally about collaboration: "There are tools for collaboration and there are tools for individual contributions. You mix the two, and you’re not necessarily working to people’s expectations." It's a good point - there's a reason they're called personal productivity apps - but it's also true that "office work" is often collaborative, in one way or another, and there's rarely a bright line between personal and group productivity. That said, it's a mistake to think that online collaboration is always superior to, say, emailing a file back and forth or even distributing hard copies and gathering comments. There are a lot of subtleties in - and forms of - business collaboration, and in general a successful office app will support as many of those forms as possible (or at least not get in the way of any of them) while also, of course, supporting the considerable amount of work that people do alone.

Comments

Nick - it would be nice to see some facts to support your theory. Who's to say: "As for the many Office 2.0 companies that are popping up, most are doomed." How do you know this? Have you considered the problems people are trying to overcome? Have you tried to establish the value of easy collaboration? How do you know desktop users would be required to sacrifice huge gobs of functionality - studies have consistently shown that users deploy a fraction of the bloat in Office applications. Where are your take up dates coming from?

Come on Nick - less opinion more facts please because anyone can piss cold water on innovation by looking at the elephant and saying 'nah - ain't going anywhere.'

Posted by: Dennis Howlett at September 15, 2006 02:42 AM

What is absolutely unacceptable to them is to take a step backward in functionality - which is exactly what would be required to make the leap to web PPAs today.
I suspect this is an overstatement, given the proportion of users that use a significant proportion of the bloated feature set of the desktop PPAs.

Yes, a few power users, but that puts the niche back where it belongs, on the complex and costly rather than the lightweight good-enough service for the masses.

Given that "the future of corporate IT" is bound to the future of corporates, by which I assume the big end of the distribution curve, maybe it will suffer at the hands of a long, but agile, tail.

Posted by: Hamish MacEwan at September 15, 2006 03:02 AM

Dennis,

re: "How do you know desktop users would be required to sacrifice huge gobs of functionality?"

Over the last couple of weeks, I've been using various prominent Web 2.0 apps (eg, Writely and Zoho) to try to accomplish the kind of basic business tasks that people currently use programs like Word and PowerPoint to accomplish. Although the online apps are nicely designed and written, using them is extremely frustrating compared to using desktop apps. (Try importing a fairly simple PowerPoint presentation into Zoho Show, and you'll see what I mean.) For the mainstream business user, who is used to Office and has adapted to its quirks, this level of frustration will be unacceptable, I believe. That leads me to the opinion that the transition to online apps will be evolutionary rather than revolutionary, and that most of the current "Office 2.0" apps have simply hit the market too early and will fail to capture a meaningful customer base.

If and when you can show me evidence of any kind of meaningful movement to adopt these applications by mainstream business users, I'll be happy to revise my opinion.

Hammish, I don't think the choice is just or mainly between "bloated feature set" and "simple feature set." The choice hinges on how easy it is to accomplish the basic, traditional tasks that office apps are used for. Most Office users are quite adept, at this point, at ignoring the features they don't care about.

Nick

Posted by: Nick Carr at September 15, 2006 09:13 AM

I think that security issues will provide a powerful impetus for corporate IT departments to move to centralized aps as quickly as the reliability and speed of the Internet connections allows. The embarrassment and legal liability from loss of sensitive data is immense.

Also -- since many corporate crown jewels consist of intangibles, including trade secrets, and since employees are mobile, there is a much to be said for ensuring that the sensitive stuff is available only by a link to the company server.

Thus, I suspect that Nick's time frame is a bit slow.

Posted by: J. V. DeLong at September 15, 2006 09:34 AM

JV, Good point, and I don't disagree. I think companies will move fairly quickly (next five years) to centralizing the distribution of many desktop apps. But wouldn't you say that serving the apps centrally from a company server is different from serving them over the public internet? And wouldn't, at this point, the default choice for a server-based package be Microsoft Office? Nick

Posted by: Nick Carr at September 15, 2006 09:40 AM

Who's to say: "As for the many Office 2.0 companies that are popping up, most are doomed."

Dennis get real. Over 50% of everything is doomed and the risks are even higher for Anything2.0. That's the big reason IT slugs will just say no to 2.0. It even rhymes.

Posted by: phoneranger at September 15, 2006 09:49 AM

I have to agree with Nick on this matter. I would love to use online PPA's instead of MS Office because the thought of easy collaboration excites me and allows me to send a lot less emails. The real problem that I see is the reduced functionality and integration. I don’t think there can be a Revolution until someone builds an entire suite of Revolutionary office products on the web. Office has had almost (or more than, don't quote me) 15 years of experience to build a tight cohesive relationship between it's products.

Posted by: Eric Bernhard at September 15, 2006 11:22 AM

It's going to come down to money at the enterprise level. No, large corporations are NOT going to distribute their office apps from a central server. It's too much of a network load and a totally BS solution to a non-problem. Are you imagining that everyone is going to return to the days of dumb terminals and give up the processing power, storage, etc. of their PC? Not going to happen.

Failure rate of Web 2.0 businesses? High. A lot of these are only playing to the "in-crowd" of bloggers and aren't even a presence (read profitable here) on the mainstream Internet.

Web 2.0 "visionaries" and bloggers get caught up in the egotisical thought process of "As I compute, the world computes."

I've actually been attempting to wean myself from Office since the Vista beta ate my hard drive, so this is sort of a forced reactionary experiment, and so far just using web apps is ok. They lack robustness in oh-so-many areas, but one can actually do an 80/20 amount of productive work with them.

Posted by: Mike Drips at September 15, 2006 12:55 PM

Even as the owner of a "web 2.0" collaboration company, I agree with much of what you are implying Nick.

I think its really quite simple:

Show me an Office 2.0 company that is achieving meaningful revenue (more than $5mm). Outside of the Web 2.0 companies who have recently shifted their business models to a more traditional software + service model (downloadable versions or opensource models), I think we'd be hardpressed to find many vendors with more than $1mm-$2mm in annual revenue.

In the end, Office 2.0 (4.0) isn't a popularity contest. The "office" companies left standing in a few years will be limited to those who succeeded in getting their products adopted and imbedded into the customers 'workflow' (for lack of a better term) and who make money from it.

A silo'ed PPA is not embedded in a company's workflow (this describes 95% of the Office 2.0 companies) thus their failure is predetermined.

A Free PPA is not making money thus their failure is predetermined as well.

For those companies who adapt to a traditional service and support model and make it through the flurry.....would they really qualify as Office 4.0? Does it matter?

I'm not sure.

Lastly, in defense of Office 2.0, are not we simply witnessing a land grab?

Darwinian economics would allow for many species (companies) competing for survivability. But this isn't Highlander, and in the end, there CAN be more than one.

Many are called, but few are chosen.


Posted by: Isaac Garcia at September 15, 2006 01:00 PM

Nick, althought I disagree with a lot (will respond in a post), debate is healthy, I think you should bring your views to a panel at the Office 2.0 Conference.

Posted by: Zoli Erdos [TypeKey Profile Page] at September 15, 2006 01:24 PM

Re security: yes, the office server with thin clients rather than PCs makes a lot of sense, since it meets security needs without ceding control. But, I suspect, taking this step will ease the transition to the next stage of having the server somewhere else, and giving up the IT department.

For a counter-trend, though, see MIGO, which sells a program that allows you to put all your work on a memory stick, plug it into the nearest PC (which must have the right programs on it - such as Office) , and be ready to roll.

Posted by: J. V. DeLong at September 15, 2006 01:35 PM

Mike, Good points. One remark: Distributing from a central server doesn't necessarily mean running on a central server. See, eg, what Softricity (recently bought by Microsoft) is doing.

Issac, Thanks. I agree that the silo model won't work (for businesses).

Zoli, I'd like to attend but have a previous commitment on the dates.

JV, "taking this step will ease the transition to the next stage of having the server somewhere else, and giving up the IT department" - agreed.

One thing, by the way, that I didn't mention is the possibility of Office coming to serve more as an interface to enterprise apps (as with the Microsoft/SAP Duet project). Any comments on how this influences the picture would be welcome.

Posted by: Nick Carr at September 15, 2006 01:37 PM

What's missing here is a compelling reason for end users to go with web-based apps over MS Office apps. While IT cost of support is important, I doubt that it will ever be the issue that forces people away from MS Office.

What is needed, IMHO, to win this battle is a comprehensive suite of apps with a feature set comparable to MS Office but with some additional characteristics that I don't see mentioned much elsewhere:

The MS Office replacement (I'll call it Office 2.0 just to give it a name) should be a platform that allows extension in various ways by open source AND closed source organizations. Microsoft apps are already programmable and extendable this way but usually in a very proprietary way. Instead, the core of Office 2.0 should be a very, very robust set of interface and interoperability standards.

This would be the MS Office killer. Enable the little guys to add functionality in much more meaningful and powerful ways than we can with the current crop of web-based productivity tools. Even OpenOffice seems very limited in this way. Although it embraces open standards, this is mostly in the area of document representation. This is not enough. There also has to be interface standards that allow the app suite to be extended in as many ways as can be conceived without the need to create a new software build. In other words, extendable in many different directions by field-installable plugins.

The really hard part is that this extendibility has to be scalable. If a user installs 100 plugins of various kinds, the resulting apps have to not fall apart.

Paul Topping
Design Science, Inc.
(Makers of the Equation Editor in MS Office)

Posted by: Paul Topping at September 15, 2006 01:58 PM

Nick - you're being a tad disingenuous. Rome wasn't built in a day as they say and M$ Office took at least 3 years to get to a rought state of stabililty. These web apps have not been long in the gestation and are improving rapidly - fact. Check out EditGrid for a serious piece of spreadsheet goodness.

If you must live (and die) on PPT then so be it but when was the last time you tried to get I/E routines to work well on M$ apps? Having said that, it is a fair point.

But...there's a lot more to Office 2.0 (or whatever X.O) than M$ Office - a lot more.

Posted by: Dennis Howlett at September 15, 2006 02:22 PM

Nick:

Unfortunate that Zoho Show didnt work as intended for you. Can you share the issues you have faced or if possible, can you email me the presentation you used?

Raju Vegesna
Zoho

Posted by: Raju Vegesna at September 15, 2006 08:10 PM

Nick,

How often do you write in MS Word anymore? You don't. Instead, you do most of your writing in your blog or in emails.

Office 2.0 is about using web based productivity apps. Not web based attempts to redo MS Office.

The first smash hit Office 2.0 application is the blog. The second is the wiki.

The next applications will include powerful widgets that integrate blog posts and wiki pages. Business users will start with simple things like to-do lists and polls. But, that will quickly grow to include widgets that integrate directly into legacy systems.

Imagine tools like a Financial Reporting Wiki, or a Project Blog for every project within the company.

That's Office 2.0.

I think you are right about the fate of companies who are busy building web based versions of MS Office.

But the real Office 2.0 applications are going to substantially improve the way that people work.

Rod

Posted by: Rod Boothby [TypeKey Profile Page] at September 16, 2006 12:34 AM

Nick,

Good post and I agree with your categorization of the state and progression of business-focused personal productivity tools. However, I think because you have accepted the premise of a flawed argument, there are a few progressions yet to come that will define the "Office 4.0" era.

Today's move of productivity apps to the web focus on the modal notions of, say, "word processing" or "spreadsheet" and in so doing, miss the benefit of the internet and also miss the key opportunity in extending Microsoft Office - that is: reducing the modality of DATA access, in a familiar productivity tool.

Office 4.0 - as you are calling that generation - will realize that MULTIPLE channels, or modes, are needed to accesses data from whereever, whenever. With the mis-guided work of so-called Office 2.0 vendors, data is more silo'd than ever... sure you can "transfer" it, "export" it and what-not, but it requires more manual effort than exists even in Office to move data around from one mode to another.

The key advance that needs to be made is use of the internet to make "my" data ubiquitously available to me, via any channel, at any time. Simply moving from a portable word-processor to one that assumes I am on the web is a step backward, not forward.

Posted by: Phil Gilbert [TypeKey Profile Page] at September 16, 2006 10:25 AM

Nick, you talked about utility computing ahead of its time. Now that it is showing signs of emerging with SaaS, cloud based storage etc you write it off? . Just because the larger incumbent vendors are not offering it, does not mean some of the new comers will not succeed - os that incummbents will not be pressured to offer similar solutions...

Posted by: vinnie mirchandani [TypeKey Profile Page] at September 16, 2006 01:26 PM

This clearly looks like someone speaking about the Web apps without using them extensively. I have been using Writely and, lately, Google spreadsheets, and i'd say majority would be happy with their feature set. Anytime, anywhere access, collaboration are great features. To top it, they're absolutely free. Microsoft is doomed, no two ways about it.

Posted by: Randhir Reddy at September 16, 2006 04:13 PM

Nick, I have just written a response to you here, if you care to read it:

ttp://www.cooperationcommons.com/cooperation-commons/the-commons-and-globalisation-some-more-slants

Posted by: Brian O'Hanlon at September 16, 2006 05:42 PM

Vinnie,

I think you failed to read the last paragraph of my post. The real action in utility computing, as far as companies are concerned, is currently in data centers and enterprise apps, not personal productivity apps. Don't confuse utility computing or SaaS with "Office 2.0." I will be writing more about the broader trends as this series continues.

Nick

Posted by: Nick Carr at September 16, 2006 09:53 PM

Phil,

re: "The key advance that needs to be made is use of the internet to make 'my' data ubiquitously available to me, via any channel, at any time."

How, and when, do you see that happening?

Nick

Posted by: Nick Carr at September 16, 2006 09:55 PM

To be honest though, when all the data is sitting on your own hard drive, or even business server, no one can seem to find it when they need it either. So the internet is no better or worse, in that respect than many personal computers and small business networks. The only skill many computer users know, is how to lose all their stuff - still - in 2006.

Posted by: Brian O'Hanlon at September 17, 2006 04:38 AM

Nick,

I think your timeline for "Office 4.0" in the early 2010's is a pretty good one for this to be mainstream. And it will probably come from the mainstream owners of today's desktop usage: Microsoft, Apple and Google (which is entering the thick-app business on various platforms). Today there are signs. In the Apple world, the dot-mac service began to do this by building certain syncing into the operating system... although I've been disappointed in how they've progressed. But let's look at that model for a minute.

Using [one aspect of] dot-mac, I can add names to my Mac Address Book application (a thick client, like MS Office). When I sync to "the cloud", then every Mac that is part of my sync group also gets the data propagated to it for their [thick] address books. And, here's today's "Web 2.0" part: I can also be online from anywhere and get to my address book with a web application hosted by dot-mac that works identically to my thick Address Book application.

By the way, this information is also available to me using Mail (either on my Macs or hosted over the Web).

So this is one example (and unfortunately, almost the only mainstream one) where data is auto-magically propagated to multiple channels. In this example, we eliminate modality both in channel (thick and thin) and in usage (address book and in mail).

I'd say Google Talk and gMail are doing this too, to some extent. I can use the Google Talk client on my BlackBerry, and it all shows up on the web, and the linkage between Google Talk and gMail is pretty modeless, too.

So, it's happening, but it's not happening enough and these "web 2.0" (so-called) vendors are pretty clueless about the value of the data from what I have seen. They are simply moving us into a more-silo'd world. (And let's not even talk about the data security lapses of these companies)

So it's good that Apple and Google, at least, are taking first-steps to addressing this from the data side... that's where the real-world pain is.

Posted by: Phil Gilbert at September 17, 2006 10:21 AM

"What will be attractive to end users - at least a sizable number of them - is to extend the usefulness of the traditional office suite through the addition of web-based tools and interfaces."

This is certainly what we are finding at EchoSign. We are not a direct replacement for a single piece of Microsoft software, we instead extend the functionality of your desktop software by automating document execution, tracking, and filing. Notwithstanding our support of Office 2.0 in general and an app that can stand alone without Microsoft, we are pushing rapidly into deeper integration with Microsoft, Salesforce, and other tools and suites because that's where the customer pull is. At least, paying customers . . . very different segment than free . . .

Posted by: Jason M. Lemkin at September 18, 2006 04:38 PM

MS Office has become popular with businesses because by using VBA (macros) one could extend the functionality of Excel, Word, Outlook, and PowerPoint. There are millions of business based created addins such as xla, and dot plus COM based addins all of which add value to MS Excel and Word. I have yet to read how a total Web based version of Office would allow an individual the capability to enhance Web Based Office applications like can be done today. I have read nothing about tools that would help re-host those millions of existing enhancement addins to a web based version of Office while also protecting the creator/owner of that enhancement giving addins. The ability for an MS Office user, users who areis not a professional programmer as well as professional programmers to further enhance the functionality is what has made MS Office so popular with the business world and that ability will need to continue in the web version if it is to really compete. A Web/Desktop version would still allow that ability which MS Office 2003 is nearly at that stage. I would like to read discussions about this.

Posted by: Jim at September 18, 2006 05:13 PM

As Mike Drops pointed out, the idea of Office 2.0 as currently put forth is nothing more than Computing 1.0, a move back in the direction of X terminals. Again as pointed out, the idea of delivering apps entirely across networks be they LAN or Internet is a pipe dream and the pipes just wont deal with it.

Rod Boothby's claim of "How often do you write in MS Word anymore? You don't. Instead, you do most of your writing in your blog or in emails"..."The first smash hit Office 2.0 application is the blog. The second is the wiki" is a classic example of short attention span theater IMO. If your writing never goes past a few paragraphs or never involves formatting, or content other than words, perhaps this claim has some merit, otherwise, it makes no sense businesswise.

Posted by: Chris_B [TypeKey Profile Page] at September 19, 2006 09:30 PM

You don't have to lose functionality when the connection is lost. Check out NumSum as an example of a web app that let's you continue working and even save stuff while offline.

Posted by: Swashbuckler at September 21, 2006 03:28 PM

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