November 06, 2009, 12:40 PM — When Microsoft releases the next version of its productivity suite, Office 2010, it will be into a very different competitive landscape than the one Office 2007 faced in late 2006.
Back then Google Apps had limited availability, and hardly anyone had heard of hosted applications provider Zoho. IBM had not yet released its free productivity software, Symphony, and while many people liked the idea of OpenOffice.org, compatibility issues with other applications kept it on the margins of most mainstream office environments.
Things have changed since then, with Google more than any other company posing a real threat to Microsoft's Office stronghold. In a little over two years, Google Apps has made headway in the business market, especially among small businesses that don't need all of the advanced functionality Office offers and that prefer Google's US$50 per user, per year price.
Google Apps -- which has much of the functionality that most business users need in Office but adds document-sharing and collaboration features Office doesn't have -- is now used by hundreds of thousands of business users, said Google spokesman Andrew Kovacs.
And small businesses aren't the only ones using Google Apps; the company counts some major enterprises, such as Motorola, Genentech and Sabic (formerly GE Plastics), as customers, all of which have tens of thousands of employees using the hosted service.
Microsoft is aware of the growing threat, and will counter it in Office 2010, which for the first time will include Web-based versions of its most commonly used productivity applications, Word, Excel, PowerPoint and OneNote.
The company believes that by offering choice to its customers, it can retain Office desktop users who may be thinking of a switch to a Web-based application, or win back some customers that might already be using Google Apps.
In a recent interview, Stephen Elop, the president of the Microsoft Business Division, said while the influx of all of these new Web-based competitors to Office is new, the suite itself is no stranger to competition.
Before Office competed with Google Apps and others, it competed with itself in the form of pirated copies people were getting from each other, he said. In fact, more people use free Office versions than use Google Apps, which should provide some perspective on the company's current dominance in the productivity market.
"We have way, way, way, way more people using free versions of Word, Excel, PowerPoint, Outlook, what have you -- way more than Google has or will in a long time using the Google applications," Elop said. "Of the 500 million copies of Office in use today, half of those have been paid for. The other half have been free. Obviously, I'm tipping a hat to people who might borrow software."
Elop said the inclusion of Office Web Apps will give Office users the ability to collaborate and share applications over the Web, which is one of the reasons some Google Apps business users have said they prefer to use the Web-based applications instead of the desktop suite.
"When you're using Office 2010, the ability to work within Word 2010 and say, 'Hey, am I'm storing that document locally or am I putting it up into a cloud-based environment of SharePoint or am I posting it to the Web?' -- all of those types of things are brought together in a way that makes sense to the user and allows the company to take advantage of some of those products," Elop said.
Google's Kovacs said that Microsoft is missing the point, however, when it talks about Office Web Apps as "lightweight" versions of more robust Office applications.
Rather than try to take the desktop experience of using Office to the Web with Google Apps, Kovacs said Google is trying to "rethink the way people are collaborating," giving them a venue that lets them edit and share documents and communicate with each other as they work on them together.
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"We don't view [Google Apps] as lightweight versions -- we view them as more powerful, that allow people to be much more productive," he said.
Early Google Apps users tend to agree with Kovacs; most of them are using the suite alongside a version of Office to complement it, not replace it, and it's the collaboration features they find most attractive.
"We still use Microsoft Word and Excel when creating documents, but if there is a document being produced that needs collaboration or dissemination company-wide, it usually runs through Google Docs," said Andrew Johnson, CIO of SF Bay Pediatrics, a physician's practice with offices in San Francisco and Mill Valley, California.
