The Enduring Value of Microsoft Office

I was intrigued to see an article in The Wall Street Journal (WSJ) on Monday describing the "challenge" that Microsoft Office faces from Google's free tools. I don't believe that Google's free tools—Google Apps, which includes Google Docs—represent a technical or financial challenge to Office at all, so I was curious to see whether I had missed something.

If you read the article, you'll discover a lot of speculation and little actual meat. It states that Google Apps "performs similar tasks to Office," which is like saying that a horse and buggy performs similar tasks to a Cessna. The WSJ reports that Google Apps has "gathered steam" in recent years and its users benefit from "reduced costs and administrative hassles" (which I assume means "reduced costs and fewer administrative hassles," but whatever).

Apparently, larger businesses are using the "specter" of Google Apps as a bargaining chip, negotiating lower prices on Office and related Microsoft tools. This actually seems like a good scam if you can maintain a poker face. Meanwhile, Google has netted a total of 25 million Apps users. The downside? Only 1 million of them are paying for the supported version. The WSJ does accurately note that most of Google's successes against Microsoft solutions have come via its Gmail email solution (also part of Apps).

And that, presumably, is the point of the article: Not that Google has actually stolen customers away from Microsoft (yet), but that small businesses (and individuals) are choosing Google's webmail solution in ever-increasing numbers and that this inroad might lead to a Google run on Microsoft's Office business.

Folks, this isn't going to happen.

For all of the hoo-hah recently about cloud computing (I'm a convert to the hosted services cause by the way) certain realities intrude on this utopian vision of the future. And they have nothing to do with obvious complaints around availability and uptime, offline use, or even familiarity with Office. No, there's a very simple reason that Office will remain very popular for years to come, continue to dominate the productivity market and, as a result, supply a very healthy portion of Microsoft's revenues on an ongoing basis. The reason is that Microsoft Office is vastly superior to every single office-productivity solution there is. As a result, customers continue to use it and, on their own schedules, upgrade to the latest versions. And when Microsoft is prepared to offer a fully hosted online version of the suite, its customers will follow them to the cloud as well.

Microsoft won't be offering a fully hosted online version of Office this year. Instead, Microsoft is offering a pretty tepid bit of Office-related functionality in its Office Web Applications. It's providing subsets of the capabilities of Word, Excel, PowerPoint, and OneNote via your web browser. These online versions of some Office applications aren't as full-featured as one has to believe is possible. But I think this speaks to the lack of desperation on Microsoft's part. That Google challenge, such as it is, has apparently done little to erode Office's popularity. In fact, I wouldn't be surprised to discover that most Google Apps users still use some version of Office as well. (Come on, let's be realistic here. Google Docs is terrible.)

Microsoft's domination over a market in which there is supposedly competition came about the old fashioned way, which isn't necessarily typical for the software giant. That is, Microsoft developed the best solution. Over the years, we've seen hapless competitors like WordPerfect, Lotus SmartSuite, and others fall by the wayside. Today, a free Office clone named OpenOffice.org is a software time machine, providing a way to install a free version of what looks like Office 95 if you like torturing yourself and aren't interested in compatibility, functionality, or support. (I'm surprised it's not more popular. Ahem.)

The funny thing is, OpenOffice.org makes Google Docs look bad by comparison. So we have three levels of functionality here: Tier A is Microsoft Office, tier B is all the Office clones, and tier C is Google Docs. And even this assessment is being overly kind to Google Docs. It's that bad.

There's little doubt that Google is Microsoft's biggest competitor and as the online giant moves ever more aggressively into Microsoft territory, it needs to be watched and responded to appropriately. Microsoft's decision to simply release a new version of its Office productivity suite alongside a very small subset of online-based solutions and the usual roundup of server products speaks volumes to the quality of the competition that Microsoft sees in this space right now. In the future, that might change. But today, we're in the same place we've been for 15 years. There's Office. And then there's everything else.