Microsoft Cancels Subscription-Software Trial, Advances Office Toward .Net

Two big developments this week include Microsoft's cancellation of a software-subscription pilot program, which has enormous implications for the company's future. Plus, a new member of the Microsoft Office family is seeking to unite back-end XML Web services with the desktop.

Subscription-Software Pilot "Completed"
Microsoft recently cancelled a subscription-software trial in Australia, New Zealand, and France that the company had intended to form the foundation of a worldwide rollout in 2003 of subscription-based software and services. Microsoft's End-User Subscription Licensing (ESL) for Office XP program has been a bust with users in the three aforementioned countries. Many users were surprised to discover that their software applications would stop functioning after a year if the subscription wasn't renewed. The pilot program had been in place since May 2001.

Microsoft blames the failure on consumer confusion. Although the company sold 10 million Office XP licenses in Australia, New Zealand, and France, only 10,000 customers signed on for the ESL version of Office XP. "Although Office XP [End-User] Subscription Licence was a popular offering, research showed the subscription model was not well understood by customers participating in the pilot," said Tony Wilkinson, Office product manager for Microsoft Australia, in a press release announcing the completion of the trial. "Customers and computer resellers from across New Zealand, Australia, and France had the opportunity to be the first in the world to assess the subscription licensing model. From their feedback, we learned that customers find subscriptions a useful method of purchasing software but are not ready to fully adopt this process."

That's for sure. Once heralded as the future of software delivery and the white knight that would safeguard Microsoft's future financials, subscription software is now on the ropes. In Australia, New Zealand, and France, potential ESL customers could purchase a 1-year subscription to Office XP, essentially paying the full price of a complete Office version every 3 years if they continually renewed. But even with the low upfront cost, few users were interested in the deal. "The consumer market just isn't ready for subscription-based software yet," Wilkinson said. "The concept of software delivered as a service is new to consumers and right now the target market just didn't understand."

Happily, Microsoft gave customers who did purchase the subscription Office XP version a full perpetual version of the software for free. However, emerging from the flaming ruins of this important software trial, Microsoft now faces a suddenly uncertain future in subscription software.

So what now? Microsoft will ship Office 11 in mid-2003, and a November beta 1 release might offer clues to any plans the company has for subscription software. But even a few years ago, when Microsoft was first investigating subscription-software schemes, the company realized that getting consumers accustomed to such a huge change to the status quo would take a while. "This is a long-term transition," Microsoft CEO Steve Ballmer said in late 2000. "We're going to be selling [traditional] copies of Microsoft Office for many, many years. This is not a quick transition perhaps, but this is the direction of transformation that we're describing." In other words, Microsoft will be back with a better subscription-software story. The company won't give up this easily.

XDocs Brings XML Data to the Desktop
On a related note, Microsoft recently announced that a new member of the Office family will likely debut in mid-2003 as part of Office 11. Dubbed XDocs, this application provides a feature-rich, forms-based front end to data that various back-end servers (made by Microsoft and other companies) are emitting in standards-based XML format. The idea is that XDocs, by providing a client environment to consume data, can leverage the investment that companies have made in XML.

Today, Web applications typically deliver these front ends. But Web applications have limitations that XDocs addresses. First, Web applications aren't usually very rich environments, and they lack many of the features we've come to take for granted in Office, such as spelling and grammar checking. Second, Web applications are temporary and thus inappropriate for transmitting large amounts of data. For example, although you could tie a college-application back-end to a Web application, the amount of data an applicant would need to supply in one sitting would be prohibitively large. However, with a smart client-side application such as XDocs, an applicant could supply the necessary information at his or her leisure and simply upload the application when finished. And because the document would be an Office application, all the features users love in the Office suite would be available.

XDocs isn't exactly a win for consumers, but it has important business ramifications and will likely be a huge Office 11 selling point for businesses. I'll examine XDocs in more detail when the first beta arrives, sometime before the end of 2002.