Microsoft is planning free web-based versions of its word processing and spreadsheet programs.
Microsoft Corp. said that it may offer a free, advertising-supported version of its basic word processing and spreadsheet software, in an apparent bid to fend off a nascent challenge from Google Inc. in the business software market, who bought web-word processor Writely in March, and began testing Google Spreadsheet in June.
The online versions of the programs will lack many of the features found in the full versions found in Microsoft’s Office suite of applications.
However, the Redmond Company runs the risk of hurting its Office business, which contributes a significant amount of revenue to the company’s bottom line. The challenge will be how Microsoft handles the Web-based service while still making money off its Office suite.
Online Fight
Microsoft, which dominates the market for desktop computer software through its Windows and Office franchises, has long resisted offering its software online. But it faces a growing pack of Web-based competitors — led by Google — that is offering similar technology for free with a business model that makes money off advertising.
The world’s largest software maker is now mulling how it can move Microsoft Works, a basic suite of business software that often comes preloaded on inexpensive consumer PCs, onto the Web as part of its growing stable of free online services.
Microsoft currently offers Works for $50, and it includes basic versions of applications which could also be found in Office, including a word processor and spreadsheet, as well as calendar and e-mail applications. Through a Web-based approach, some of these services could be folded into currently available services, such as Windows Live Mail.
It is not clear if Microsoft would offer the services under the guise of Windows Live, although plans call for the service to be advertising-supported. There is a service named Office Live, but that suite of products has more to do with putting a business online rather than the suite of software applications using the same name.
Microsoft continues to roll out new online services under the Windows Live brand and it started testing Office Live software for small businesses to create e-mail accounts, Web sites and collaborates on projects.
Alan Yates, general manager of Microsoft Information Worker Business Strategy, said the company will consider many options to woo entry-level users. “We are also thinking about how we might take advantage of new business models like advertising and other payment models, as well as new forms of distribution,” said Yates.
JupiterResearch senior analyst Joe Wilcox said that a free or hosted version of Works may not be a good idea for Microsoft. "That is not to say it would be a bad more. Microsoft could easily do the right thing, just for the wrong reasons," he explains.
"If Microsoft does bring Works to the Web, the reason should be to bulk up the commoditized functions of its Windows Live products and services," Wilcox continued. He said that a web-based Works should be for consumers, and not included as part of Office Live.
"Works as part of Office Live risks cannibalizing Office sales to small businesses. I simply do not see a strong up-sell opportunity to Office," he added. "More likely, many very small businesses would find the hosted or free Works as good enough. I have got to strongly encourage Microsoft folks to resist making product decisions in response to competitors; there simply is too much of this kind of behavior going on."
Revenue from software licenses for Office and the Windows operating system accounts for a bulk of Microsoft revenues. The challenge for Microsoft will be to make sure a free or, possibly, a subscription-supported version of Works would not hurt sales of its dominant Office software, which accounted for a quarter of the company’s $44 billion in sales last year.
Like many others Microsoft has already started experimenting with web-based services. Windows Live lets people create a personal page that brings together many of the things they do online such as read news feeds, blogs and deal with e-mail.
There is also a beta version of a WYSIWYG writing tool for writing blog posts.
Last month, Google said it created a free software platform to run a set of business software programs including e-mail, scheduling and communications. A paid, premium version will be available later this year with an ad-free option.
At the time, Google also said its online spreadsheet and word processing software were candidates for bundling into its business software platform.
Google acquired word processing Web site Writely.com in March and began testing Google Spreadsheets, which allows users to create, store and share spreadsheets on the Internet, in June.
Many other smaller hi-tech firms run web-based versions of the applications people use in business or on their home PC. For instance the Open Office project offers free versions of programs that are very similar to those found in Microsoft Office.
Microsoft expects its new version of Office, due out in early 2007, to spur another round of demand. Office includes Outlook e-mail, PowerPoint presentation software, Excel spreadsheets and Microsoft Word.
No date has been set for when the free programs will show up on the net but the software giant told the Reuters news agency that it was "considering" new distribution and payment models for its software.
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