13-Apr-02
The Next Microsoft Office

A Microsoft marketing presentation designed for focus groups and similar test markets was briefly posted to a number of Web sites. Most sites took it down within a couple of days to avoid nasty letters from Microsoft's legal department (Microsoft has confirmed it is genuine). I had the opportunity to review this presentation several times.

So why should I, or anyone else, take a marketing test presentation seriously? First, it precisely matches what Microsoft has been saying they intend to do. Second, it has a very "late in the process" look. It isn't dealing with basic concepts, but with marketing details.

Having participated in at least one major Microsoft focus group (naming Visual Studio), and a few Microsoft marketing surveys, both direct and through survey firms, I'm pretty familiar with how they operate. The big decisions were made in market strategy meetings, now they're refining how to present it to the customers.

Of course, a major customer rebellion could still scrap it, but I see this as carefully designed to avoid rebellion. I don't think anyone will see a reason to protest until it's way too late to have any effect. As I see it, only political infighting within Microsoft is a serious threat - that has killed more than one promising project.

Microsoft Office is projected to be available in two distinct versions:

• Office Pro - sold in a box just as it is today, with similar features.
• Office.NET annual subscription. Critical parts of the program remain on Microsoft's .NET servers, not on your hard disk. This version offers additional features, some of which are:
  • Lower up front "buy-in" price, and less expensive to add more users.
  • You can work with your same environment and files when you're on the road. Branch offices can have the same access to the company's data as the main office.
  • Online scheduling with comparative daily schedules for arranging meetings with others in the firm.
  • Automatic notifications and alerts.
  • Meeting workspaces and team workspaces for shared information.
  • Online training and document templates.
  • Enhanced instant messaging and integrated e-mail.
  • Send Fax over the Internet, from your desktop - no modem required.
  • Your office's own online communities..

Now here's a really interesting part - what happens when your Microsoft Office.NET subscription expires? You have three options:

• You can renew it for another year - nothing changes.
• You can "upgrade" to Office Pro for $395 and continue to use your documents locally - but you lose all access to the additional on-line features.
• You do nothing. Microsoft Office goes into "read only" mode. You can look at your documents and print them, but you can't change them or create new documents, and you lose all access to the on-line features.

Note the very conspicuous absence of any method to run locally with Office Pro and still access the on-line features - and the rather high cost of moving to Office Pro. Once they've got you on a .NET subscription, they want you to stay there.

Microsoft has long desired to move all users to a subscription basis, so now they want to lure as many users as possible with an attractive, low buy-in subscription product with attractive additional features, then keep them there by making escape expensive and unatractive.

Universal availability of broadband Internet connections won't come any time soon, so the Office Pro version will remain important - but once they have critical mass on the subscription version, they can justify moving Pro to subscription "in response to customer demand".

So, What's Behind All This?

Microsoft is addicted to rapid revenue growth. If you want to know just how addicted, you can read Bill Parish's stuff, but the point is, rapid revenue growth is getting a lot harder to come by.

• Microsoft Office accounts for 40% of Microsoft's current income, but that income is threatened if they can't come up with compelling reasons to upgrade to the next version. What more can they add?
• The PC market is highly saturated, and even the replacement market is stagnating (see my article No Rebound for Tech Stocks), so there won't be a lot of sales to new customers. Most unexploited markets are now in low income areas that can't afford Microsoft Office.
• Microsoft can no longer take market share away from other office suite publishers - they already have all the market.
• The general consensus is that Web Services are the future, not boxed software. Web services, left to their own devices, don't require a Windows client or Windows on the servers.
• Microsoft's initiative to take over the entertainment business died an awful death and their ability to monopolize digital entertainment distribution is still uncertain.

This Office.NET move would provide Microsoft with some serious advantages:

• Microsoft leverages its .NET Initiative to get people to give up the "shrink wrap" version of their cash cow product and move to a subscription basis - steady income without the hassle and development cost of an upgrade cycle.
• Microsoft leverages their desktop Office monopoly to lure its users into .NET, a Windows centric version of Web services.
• Web services, being inherently modular, can be enhanced, extended, shuffled, reorganized, added to and recombined to conceal price increases in ways that just can't be done with a boxed product.
• By using them for Office.NET, Microsoft can keep components of My Services alive until they can make another attempt to convince financial and consumer companies to sign up (see our news item Microsoft Hits Brick Wall).

The very best thing about a .NET solution (from Microsoft's point of view), is that they hold the users' own documents and data hostage on a Microsoft .NET server. Since all those documents and data are in Microsoft proprietary file formats, they are not particularly useful even if you can download them to your local hard disk. If you don't pay your subscription fees, you lose your company's entire digital history.

What's coming after this?

Microsoft intends to eliminate the current Windows file systems. Instead of data and documents existing as discrete files in subdirectories on a disk, they will be data elements stored in a database. This will likely obsolete all current Windows software and require its replacement. Microsoft has already announced they will no longer pay much attention to backwards compatibility, "due to security considerations".

Depending on details of implementation, it may no longer be possible to write files to a floppy or Zip disk, or as attachments to an email. To transfer a document to another person, a data element would be transferred from your database to their database through a .NET server. Corporations would have their own .NET servers, and everyone else would use Microsoft's,

There are still a lot of open questions, even though the database file system has been a long time objective for Microsoft. The most important question is whether they can make it work reliably. Database filesystems have long been available with the Pick and IBM AS400 operating systems.

Recommendations

For years I've been recommending breaking free from Microsoft products - mostly to deaf ears. Now many of you truly no longer can, and the rest of you won't, so the only thing I can recommend is to get out your wallet - Bill Gates is about to become a lot richer.

For the curious, and for those who really think they might have the balls to do it, start with Should Your Business Use Linux? and Is There Really a Choice? By the way, Automation Access runs on OS/2 and uses no Microsoft software.

Links

• Vibrant Logic - Office.NET - A Sneak Peek
• The Register - Microsoft continues Office subs quest
• CNet News - New Windows could solve age-old format puzzle--at a price
• eWeek - At Microsoft, Security Trumps App Compatibility