Is Microsoft Office In Trouble?

Is Microsoft Office in danger of having real competition for the first time in a decade? That's the question being asked this week, as the battle for office productivity suites heats up on several fronts.

The impetus for the question was the announcement that technology consultancy Capgemini will begin recommending Google Inc.'s top-level online suite of office software -- Google Apps Premier Edition (GAPE) -- to its corporate customers.

On one level, it's great news for Google. Capgemini will bring new customers into the fold, and the office suite becomes a potentially significant source of new, steady revenue, since GAPE costs $50 per user annually.

But as good as the news is for Google, it might be just as bad -- or even worse -- for Microsoft. What it does on a perception level is legitimize the notion of online office productivity suites. Paris-based Capgemini is one of the largest service providers in the world; if a huge, global services company is recommending an alternative to Office, it must be ready for prime-time, goes the thinking.

The key advantages of Web-delivered software vs. Microsoft's packaged version is spelled out very clearly in this paragraph from Capgemini's press release announcing the deal:

"SaaS solutions, such as Google Apps Premier Edition, provide a cost-effective, easy-to-deploy alternative to installed, licensed desktop software; they are delivered over the Internet via a Web browser and do not require companies to install or maintain software locally, or to tap into internal IT resources. Having the ability to share, review, and edit data in a collaborative environment on the Web naturally serves the needs of Capgemini's enterprise clients with multiple facilities, global locations and distributed employees."

Microsoft, of course, feels differently. A spokesman made the following statement via e-mail:

"We believe competition is good for customers and the industry. That said, customers tell us that our solutions deliver the ease of use, reliability and security that enterprises need. This is validated in the strong reception we've seen to 2007 adoption and usage and by having achieved more than 90% enterprise agreement renewal in the fourth quarter of our last fiscal year. Our long history in meeting the complex needs of enterprise customers, a partner ecosystem that has grown 43% on the Office platform since last year and our current and future investments in the software + services arena will deliver even more flexibility to customers."

It certainly is true that it's still an Office world. But faint cracks have begun to appear in the Office foundation, cracks that are lengthening and deepening.

Exhibit A is the fight over open document formats. Microsoft continues to struggle in its efforts to get Office 2007's primary document format, Open XML, or OOXML, accepted as a standard.

With its recent defeat at the ISO, which Microsoft tried desperately, and unsuccessfully, to spin as a victory, Office faces an uphill battle to gain acceptance and usage among global governments.

More and more, governments are looking for document formats that are interchangeable. While Microsoft has attempted to make OOXML more open, it's indisputable that it remains a largely closed, proprietary format. Contrast that with Open Document Format, or ODF, which is used by open source Office competitors like OpenOffice and StarOffice. ODF sailed through the ISO approval process, without a single vote against it. If OOXML ultimately fails to gain ISO certification, it would be seen as a crushing blow for Office.

But Microsoft may prefer defeat at the hands of the ISO to making OOXML truly open. Microsoft CEO Steve Ballmer said as recently as July that Microsoft won't go there.

"Open source is not a business model we can embrace," he stated. "It's inconsistent with shareholder value." Given that stance, one is left wondering if Microsoft will make the necessary changes to OOXML to gain approval before March 2008, when the next ISO vote is tentatively scheduled.

If not, OOXML may be doomed to ISO failure. If that happens, the perception of Office may be further affected, and that will be felt in a couple of ways. First, it'll be felt at Microsoft's bottom line, as European and other global governments switch to true open format productivity suites. Second, it will further open the door to competitors such as OpenOffice and GAPE.

For now, Office is still the main game in town. But it's no longer the only game in town. The Capgemini-Google partnership and open document threat are potentially serious harbingers of things to come. Microsoft would be wise to pay close attention the shifting playing field.

About the Author

Keith Ward is editor of Virtualization Review magazine. You can contact Keith at [email protected].