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The Office question

December 18, 2007

eWeek's Joe Wilcox is ready to say the last rites for so-called "Office 2.0" software after a report from NPD showed that relatively few consumers know about online productivity applications like Google Apps and Zoho. But Wilcox misreads the study. He writes that "94 percent of U.S. consumers have never heard of Web-based productivity suite alternatives." Actually, the survey, as indicated by a chart in Wilcox's post, puts that figure at 73%. That means that more than a quarter of PC users are aware of the online alternatives, which actually strikes me as fairly high given that it's so early in the market's development. The study also shows that 4.5% of PC owners are users of the apps, usually in conjunction with traditional word processing and other programs, which while certainly modest again seems fairly high.

What would be interesting to see is the percentages by which awareness and use have increased over, say, the last year. The numbers would, I'd bet, be very high and would help put NPD's study in context.

As I argued in my post Office Generations last year, we're in the early stages of the "hybrid phase" of personal productivity applications, when most people will use web apps to extend rather than replace their old Office apps. This phase will play out over a number of years as the web technologies mature, at which point it will become natural to use purely web-based apps (with, probably, continued local caching of data and program code).

What this means is that Microsoft has a good opportunity to maintain Office's dominance during the switchover by pursuing what it calls its "software plus services" strategy. But Microsoft should be anything but complacent right now. Maintaining market dominance does not necessarily mean maintaining traditional levels of profitability. The biggest threat posed by online alternatives may well be to undermine Microsoft's pricing power - a trend we're already seeing in the student market.

And it's markets like the student market - markets where people actually have to shell out their own money for copies of Office - that Microsoft faces its biggest immediate threat. If you get Office as part of your job, you don't have a whole lot of motivation to move to Google Apps, Zoho or Buzzword. Indeed, it might not even be allowed. But if you're facing a multi-hundred-dollar purchase, the free alternatives suddenly become a lot more attractive.

Damon Darlin, a New York Times tech reporter, recently wrote about his decision to use Google Apps when faced with even a fairly modest $150 outlay for a family version of Office. What he's discovered is that the online suite actually suits his needs better than Microsoft's workhorse. He declares: "I’ve lived for a month without Word. And it has set me free."

Once people get used to using the online apps at home or at school, they may well find the idea of buying an expensive piece of software, installing it on their hard drive, and regularly patching and updating it to be awfully old-fashioned. That's the scenario that should be of greatest immediate concern to Microsoft, and it's a scenario that is beginning to play out, even if the numbers aren't yet huge.

In Wilcox's post, by the way, an NPD analyst makes an interesting suggestion: that to begin speeding adoption of their online apps, companies like Google, Zoho, and Adobe may want to create a packaged version to sell through traditional software retailers, the way Apple does with its .Mac online service. Boxing the cloud: it would be kind of like selling a bag of air, but it may well be a smart move.

Comments

When people talk about Web vs client office systems I think they misunderstand how the software works. Web Office apps run (mostly) in JavaScript on the client. They use the HTML GUI elements as building blocks for the interface and store their state on the server.

Traditional destkop apps run mostly in native code, store their state on the client or network and use the native platform GUI components for the interface.

The only real difference here is where the documents are stored (which is largely a factor of whether you have a hosted service offering or not - e.g. Office Live), and how the app is written (Java Script vs Native Code).

If you take a green field and design a system from scratch today - ignoring all current technology, what would you have? I bet you would go for a ubiquotous cross platform system that is able to use the native features of each client device, coupled with an optional hosted service. The office suite would be installed silently (like JavaScript).

I'm thinking this would be more like a dynamic, cross platform version of MS Office, rather than bloated Web app.

Posted by: Joe72 [TypeKey Profile Page] at December 18, 2007 01:40 PM

A survey size of "nearly 600". The way the question was asked (it supplied the names of the online suites the users were supposed to have heard of) I bet several of those (4? 10?) fibbed. I've lied about using "social networks" to people just to get them off my back, for example.

Also, the NYT article reads like a reformatted press release. Perhaps the story was written to give the reporter access to google in the future?

We've used web-based calendaring and email since 200 (first yahoo, now google), and nobody wants to fall for cloud computing more than I do (and I suffer the consequences weekly), but it isn't cheap for google to provide these services! And the docs/spreadsheets are really a joke -- fantastic for writing/managing todo lists, blog posts, and 500-word reformatted press releases like the NYT article, however.

Posted by: dubdub [TypeKey Profile Page] at December 18, 2007 03:56 PM

Good spot, Nick.
Having tried both GApps and Zoho I must say I am underwhelmed
They're "good enough", true, but so is Office.
That's why I have made the switch to Mac - while Numbers is just as good as Excel, and Pages is somehwat inferior to Word, especially on long, structured documents, Keynote is light years ahead of dreadful PPoint.

There was a time when new software excited us, but it was never because it had LESS functionality than old software.

Posted by: gianni [TypeKey Profile Page] at December 18, 2007 05:37 PM

@Gianni:

"There was a time when new software excited us, but it was never because it had LESS functionality than old software."

True. Precisely the reason conventional web office suites have been such a dud.

Have to say Nicholas Carr's concepts on Office Generations 1.0-4.0 (that he blogged last year [September, 2006] on) have been an inspiration for me. Omni-functionality negates segmentation of data and functions presented by conventional applications, and creates opportunities that excel anything else.

It is an amazing time. Seamless web is on. More coming soon.

More at:
http://web3next.blogspot.com/2007/11/blending-of-data-and-omni-functionality.html

Posted by: Joseph Pally [TypeKey Profile Page] at December 18, 2007 09:17 PM

Microsoft Office for Student costs about:

$59.95 for US (http://www.theultimatesteal.com/home.asp)

$64.00 for Canada
(http://www.theultimatesteal.ca)

I don't think Microsoft Update is a big deal. I've never cared what Microsoft Update done to my machine.

This is the same argument with "Ads isn't a big deal, most people just ignore it anyway".

Things have become the norm.

Posted by: ShiroNanami [TypeKey Profile Page] at December 18, 2007 10:45 PM

Of course educational versions of programs are cheap. People tend to stay with the programs they learn.

Too bad more students aren't taught about OpenOffice.org: free and powerful and compatible with MS Office files. And now OOo has a plugin that makes it easy to switch files back and forth between Google Apps.

Posted by: LaneLester [TypeKey Profile Page] at December 19, 2007 08:13 AM

I'm thinking this would be more like a dynamic, cross platform version of MS Office, rather than bloated Web app.

I think that's the first time I have ever seen the word "bloated" in the same sentence as "MS Office" where the two were not intimately related. Kudos to your bravado, sir!

Of course the opposite is true, and the web apps are amazingly lightweight and portable compared to Office's 425MB + random assorted files installed outside its directory (try downloading and using that on-demand sometime!). And in fact that is the real difference between the two, not merely where the document is stored--the advantage of web-based office suites is their portability and consistency (which translates, even for those which charge for use, into much, much lower costs), not their storage mechanisms.

But thank you for that post--I now understand why so many people seem to think that Live Workspaces compete with web-based office suites. Google, et al, clearly need to do some more education on their products.

Posted by: Scott Wilson [TypeKey Profile Page] at December 19, 2007 02:36 PM

>> Boxing the cloud: it would kind of like be
>> selling a bag of air, but it may well be a
>> smart move.
A promotion campaign targeting high school kids and colleges would be good too. Getting them "hooked" early could lead to them adopting it in the workplace after they graduate, get "real jobs" and are in a position to make buying decisions. Back in the day, I think this was called the Five Year Effect.

Posted by: Linuxguru1968 [TypeKey Profile Page] at December 19, 2007 02:36 PM

Posted by: Linuxguru1968 [TypeKey Profile Page] at December 21, 2007 02:18 PM

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