MS Office 2010 Takes Fight with Google to the Cloud
Business Standard

The beta version has seen over 1.3 mn downloads; over 2,000 firms in India are moving to the latest version.

Last September, research firm IDC had cautioned that while Microsoft Office still held the lion’s share of the market for office productivity suites, Google was rapidly gaining ground. The survey indicated that 19.5 per cent of the respondents were in organisations that used Google Docs in some form, up from 5.8 per cent a year earlier.

Google Docs, unlike an offline suite, offers its services on the cloud — a metaphor for internet. The market opportunity is huge. IBM, for instance, pegs the global market for cloud computing services to be worth $126 billion by 2012. The global market was $48 million in 2008, according to the information technology major.

Microsoft sought to plug this hole in the cloud by unveiling its Office 2010 a couple of days back. The suite includes “Web Apps”, which allow business users to store documents centrally and access them anytime, from anywhere, similar to online office suites like Google Docs and Zoho. It is in beta for individual users till mid-June. The professional version of the software would be available at Rs 20,000 and the consumer and SMB versions at Rs 5,000 and Rs 10,000, respectively.

“The response to Office 2010 suite (which includes Web Apps) in India has been excellent,” said Rajan Anandan, managing director, Microsoft India. He adds that Web Apps can easily match the online offerings of competing players, primarily online search giant Google.

The beta version has seen over 1.3 million downloads and over 2,000 companies, including Tata Consultancy Services (TCS), Lowe Lintas, Virgin Mobile, Mindtree Consulting and Infosys Technologies are moving to the latest version.

Office 2010 will help people collaborate online and offline with ease, said Anandan. He, for instance, no longer uses a phone in his office. “Hardly anyone at Microsoft uses a phone anymore,” he quipped. Instead, Anandan uses his company's Unified Communication (UC) collaboration tools to take calls (with voice over internet protocol or VoIP), structure messages, set up and attend web conferences, and exchange notes.

The power of these collaboration tools is being extended to the cloud, too, with Office Web Apps, according to Anandan. “Imagine the cost savings from UC tools for companies,” he said, adding, “Now think of Office 2010 and Web Apps that can increase that savings manifold for enterprises and small businesses by taking the offerings to the cloud, thereby reducing costs and increasing productivity.”

The new edition of Office 2010 has new features that enable users to embed videos in PowerPoint presentations, have voice-to-text conversion for voice mails on Outlook or see trends for a select set of information (and not the entire document), said Anandan.

The new suite also allows co-authoring of documents simultaneously on multiple workstations. Different people can connect simultaneously to view documents and make changes in real-time.

“Over the last 12 months, our strategy has been to sharpen focus on cloud services. Office 2010 was a logical conclusion,” said Anandan. Microsoft, he added, offers cloud services across three layers in India. The first is “Software as a service”, or SaaS, which includes Microsoft Online Services with over 600 commercial customers in India and over 10,000 seats. Its partners include HCL Technologies, Infosys Technologies and Wipro Infotech. They provide the value-added services. Microsoft's hosted ERP partners include RoboSoft and Net4India.

The software giant also has a cloud offering named PaaS, or “Platform as a service”. This revolves around its recently-launched Windows Azure Services platform in India. HCL Technologies uses Microsoft's management application developed on Windows Azure to help customers manage data. Likewise, Sportz Line has migrated an industry-leading sports analytics application to provide real-time data to teams. Two cricket teams in Indian Premier League are its customers.

“Infrastructure as a service”, or IaaS, is the third cloud-computing offering from Microsoft, according to Anandan. It has a partnership with Reliance Communications (RCom) for cloud computing services, wherein it provides enterprises and SMBs in India access to a variety of enterprise-scale IT solutions, applications and services on the pay-as-you-go model. These include server hosting, data storage and archival. Microsoft’s virtualisation (a technology which helps companies reduce the number of servers and, hence, hardware costs) and management technologies have helped RCom reduce input costs involved in providing these services.

The concept of collaborating in real-time on the cloud, or internet, is not new. Online developers like Zoho, Upstartle, 2Web Technologies and 37Signals use internet to allow collaboration. For instance, if a file is hosted on the web, rather than a local server or a desktop, one can allow several users to read and write from it at once.

Online giant Google took the concept a step further with its free Docs office suite (it rolled out an updated Docs service last month which features enhanced collaboration tools) that offers support for real-time collaboration.

Office 2010, too, enables real-time collaboration, either from the Office desktop applications or the all-new Office 2010 Web Apps. In addition to the Outlook updates, there are new PowerPoint tools for internet-based presentations and handling videos. The new “Broadcast Slide Show” tool is expected to be the most-used new feature of PowerPoint. Windows Live also will run Web-based versions of the Office software, as part of the company's SkyDive service.

However, Microsoft, according to Anandan, does not see these cloud offerings replacing personal computer (PC) software. “We see them as complementary offerings,” he said. The online versions will be geared toward tasks best done online, such as collaborative editing. The PC software will be where people will continue to go to create documents, spreadsheets, and PowerPoint decks.

Globally, over 8.6 million people use Office 2010 and related products. Office Mobile 2010 will soon be available on Windows 6.5 mobile handsets and on a broad range of Nokia smartphones starting with Nokia’s business-optimised range, E-series.

Meanwhile, Google, which created cloud-based rivals to Word and Excel, is cajoling business users to switch to those instead of upgrading to Office 2010. Microsoft, which has nearly 95 per cent of the market for office software, however, is not taking things lying down.

Microsoft to Make Web-Based Programs a Billion-Dollar Business, Elop Says‏
Bloomberg

Microsoft Aims for $1 Billion in Web-Program Sales

 

Microsoft Corp.’s business-software unit expects to get at least $1 billion from Web versions of its Office and e-mail programs in the next three to five years, said Stephen Elop, head of the division.

Over that period, Microsoft predicts about half its customers for e-mail and collaboration software will switch to so-called cloud versions of the programs, which are stored and run from Microsoft’s server farms.

“Three years, five years, is it a billion-dollar business? I’m quite certain it will be,” Elop said in an interview on Bloomberg Television. “Because so much of what we’re doing is focused on this particular area, we’re seeing very large customers making large commitments in this direction. You’ll see it grow rapidly.”

The rising revenue will mean Microsoft can increase profit at the unit, Microsoft’s largest, even as analysts predict margins will narrow, Elop said. The company is readying its first Web-based versions of word-processing and spreadsheet software to match Google Inc., which is trying to steal Microsoft’s corporate customers and win over consumers.

Redmond, Washington-based Microsoft is also pushing cloud versions of its Exchange e-mail program and SharePoint, which allows employees to work together on projects and set up corporate Web sites.

Microsoft wants to use that software to lure users away from International Business Machines Corp. More than half of customers for these Microsoft programs are switching from IBM’s Lotus, Novell Inc.’s GroupWise and other competitors, said Microsoft Vice President Ron Markezich in an interview this week.

Microsoft rose 7 cents to $28.67 at 4 p.m. New York time on the Nasdaq Stock Market. After gaining 57 percent last year, the shares have lost 5.9 percent in 2010.

Microsoft Risks Margins as Office Unit Fights Google 

Bloomberg News

Microsoft Corp. President Stephen Elop is preparing for the biggest shakeup to the $19 billion Office business in a decade as the company races Google Inc. to sell Internet-based programs.

Two years into his career as head of Microsoft’s business software unit, Elop says cloud computing and social-networking sites have created a “constructive disruption” that could be more of an opportunity than a threat. Office 2010, due by June, will include a free Web-based version for the first time, matching similar software from Google. Future updates may add Twitter-like functions that allow users to post short messages.

The dilemma for Elop, 46, is how to embrace Web-based software while protecting his unit’s 64 percent profit margin. Under the cloud-computing model, Microsoft would store Office programs on its own servers and deliver them to customers online, which costs the company more than supplying software installed on computers. Elop says the shift will mean businesses actually end up spending more money with Microsoft.

“In that cloud environment, we are not only selling them software but we are also saying, ‘We’ll take care of your networking, your hardware your operations, your customer support,’” Elop said in an interview. “We’re doing much more work for the customer. What that does is increases revenue and allows us to participate in more profit.”

Elop’s Office unit is Microsoft’s biggest business, accounting for a third of the company’s $58.4 billion in sales last fiscal year. The shift to Internet-based versions of Office may cut margins by 5 to 10 percentage points, said Matt Rosoff, an analyst at Directions on Microsoft in Kirkland, Washington.

‘Have to Do Something’

“Elop’s challenge is to move carefully and not undercut the traditional software business,” Rosoff said. “You don’t want to give everybody free Office over the Web because that jeopardizes a highly profitable business, but you have to do something.”

Microsoft rose 24 cents to $28.59 at 4 p.m. New York time on the Nasdaq Stock Market. After gaining 57 percent last year, the shares have lost 6.2 percent in 2010.

Microsoft’s Office division, which dominates the word- processing, spreadsheet and presentation management software market, reported a 2.8 percent drop in revenue last quarter, with sales to businesses falling 6 percent. Consumer revenue rose 12 percent -- a slower pace than personal-computer sales, the Redmond, Washington-based company said.

Free Version

Microsoft is projecting that consumer and small-business sales will pick up with the release of Office 2010. The program will offer Web features, such as the ability to collaborate and share documents over the Internet. There also will be a free version included on some PCs and a student offer that’s two- thirds the price of the current product, which starts at $149.

That will attract consumers who might otherwise be reluctant to upgrade, Elop said. A record 4.5 million people have downloaded a test version of Office 2010, said Chris Capossela, a senior vice president who works for Elop.

The U.S. Olympic Committee used Office 2010’s SharePoint program to set up a Web site for reporters covering the Winter Games in Vancouver, allowing them to access the latest information on hometown athletes and follow their Twitter feeds.

Dell Inc. plans to install the new Office on at least 25,000 of its employees’ computers by year-end. It will rely on the software to help engineers and sales teams share notes and collaborate on projects over the Web, said Tom Piegat, a manager in Round Rock, Texas-based Dell’s information-technology department. Microsoft is taking the right steps to let employees work, save and share on the Internet, he said.

‘Jury Is Still Out’

“Whether that promise gets completely fulfilled with Office 2010, I’m not sure about that -- the jury is still out,” Piegat said. “But the building blocks are there.”

Office’s Web-based features are unlikely to generate significant additional revenue for the next few years and investors may not like the narrowing profit margins that result, said Heather Bellini, an analyst at ISI Group in New York.

“It’s a market they need to be involved in -- if that’s the way the industry is going, you don’t want customers to rip out Microsoft and go to a Google solution,” Bellini said. “But I question whether we’ll be able to have a company where the stock will go up even though margins are going down.”

Margins Shrink

Microsoft is selling more of its software as a service, which may hurt profit margins, said Bellini, who hasn’t yet calculated by how much. Besides the Web-based Office project, the company started charging this year for its Azure cloud- computing services, which store and run programs on behalf of customers.

Gross margin, the percentage of sales remaining after the cost of making the product, was 79 percent in the fiscal year that ended June 30. Ten years earlier, it was 86 percent, according to data compiled by Bloomberg.

Elop is playing catch-up in cloud software. Companies like Google and Salesforce.com Inc. have more experience with Web- based programs. Even so, Microsoft has an edge over Google in selling to large companies, Rosoff said.

Google, based in Mountain View, California, offers Internet-based word-processing and spreadsheet programs for free to consumers. It charges $50 a year per user for businesses.

“We welcome Microsoft’s movement to the cloud,” Google said in a statement. “Choice is good for users, and their direction further validates that the future of computing is in the cloud.”

In October, the Los Angeles City Council voted to have Google manage e-mail for city workers. Rexel SA, the world’s largest distributor of electrical equipment, also considered using Google -- until Microsoft cut the price of its e-mail software by 30 percent.

‘Pushing the Envelope’

“That’s going to be the challenge for Elop,” said David Smith, an analyst at Gartner Inc. in Stamford, Connecticut. “He is going to be competing more and more with things that are free or lower cost.”

Sales of cloud-computing services worldwide rose an estimated 21 percent to $56.3 billion last year, according to Gartner. By 2013, that number will hit $150.1 billion. The shift is of the same magnitude as the move to graphical computer software and the advent of the Internet, Elop said.

Elop, who was chief executive officer at Web-video pioneer Macromedia Inc., has experience building successful businesses out of Internet programs. At Macromedia, he helped make Dreamweaver the top Web-page authoring program, edging out Microsoft’s FrontPage. Macromedia also developed Flash, the Internet’s most popular video and animation software.

Elop said Microsoft CEO Steve Ballmer hired him in part because he had competed with the company for most of his life. Now that he’s at Microsoft, he’s championing the idea of making software that’s more compatible with rival products.

Rival Browsers

Elop wants to make sure that Office’s Web applications work on Mozilla Corp.’s Firefox and Apple Inc.’s Safari browsers, as well as Microsoft’s own Internet Explorer, Capossela said.

Elop’s interest in competing products impressed Capossela, who interviewed him for his current job without realizing he was screening his own boss. Elop walked into the Sunday morning interview at the Woodmark Hotel in Kirkland, Washington, with an iPhone, BlackBerry and Windows Mobile phone holstered to his belt, Capossela said. He pulled out each one to talk about them. Elop discussed his experience installing Microsoft’s Windows Vista on an Apple Macintosh computer.

He arrived as an outsider at the company, at a time when all the other product units were led by executives who had been at Microsoft more than a decade. Elop spent his initial few months listening to a team he inherited from 27-year Microsoft veteran Jeff Raikes, Capossela said. After about a year, Elop started talking about changing Microsoft’s approach to the market.

“He did a good job of articulating that we needed to be leaders in this disruption even though that can be scary,” Capossela said. “We can either worry about a disruption happening to us or we can do it in a way that’s constructive.”