July 11, 2007 11:24 AM PDT

Microsoft eyes new ways to sell Office

DENVER--Microsoft isn't quite ready to talk about plans for an ad-supported or online version of its Office franchise. But the company clearly is thinking about it.

"We've put more of our marketing IQ behind alternative business models and alternative distribution strategies in the last two years," corporate vice president Chris Capossela said in an interview at Microsoft's Worldwide Partner Conference taking place here.

"It's definitely something where we feel there is this whole population of people we are not reaching."

Many of those people are in emerging markets, where Microsoft is trying things like prepaid cards good for two or three months worth of Office use. But Capossela agreed that there is an opportunity to reach consumers in well-developed markets like the U.S. and Europe as well.

"Office is used by tons of those folks, but it's often old versions of Office," Capossela said, adding that the company is actively trying to see whether different ways of pricing or offering Office might prompt more consumers to use the latest technology.

"Would prepaid cards work in the U.S.?" We don't think so, but those are the types of questions we try to ask ourselves," he said.

One possibility is to introduce some sort of online productivity options as part of the Office Live suite of software. BusinessWeek reported last year that Microsoft was exploring such a move.

Which way next?
Microsoft won't say for sure that's where it's headed, though CEO Steve Ballmer did note in his keynote speech on Tuesday that Microsoft would soon rebrand its existing small business Office Live tools as it plans to add services for individuals to the Office Live line.

In its initial incarnation, Office Live has been about making new services available over the Internet, primarily e-mail and Web hosting. But Microsoft has been grappling for some time now about whether to offer more of its consumer software for free, supported by advertising.

An internal Microsoft position paper, as reported by CNET News.com in 2005, made the case for an ad-funded version of Microsoft Works, noting that Microsoft gets only a couple of dollars per new computer that sells with a bundled copy of Works. That revenue could easily be surpassed with an ad-funded version.

While those economics may indeed be true, Capossela pointed out that it's not just about revenue. One of the challenges is whether people really want to see ads when they are in a spreadsheet or word processing program.

"You can't just apply the economics," he said.

And Microsoft may not need to take its entire Office or Works product online. The company has talked broadly about a "software plus services" strategy in which online services are used to augment existing software products. One option that would fit that model might be for Microsoft to offer a "light" version of its productivity tools over the Internet, while relying on the full Office for more advanced document creation.

Both Capossela, in the interview, and Ballmer, in his speech, pointed to what Microsoft has done with Outlook and Exchange, where the e-mail and calendar data can be most comprehensively managed in the Outlook desktop program, though it can also be accessed via a Web browser through Outlook Web Access, on a smart phone through Outlook Mobile, or even through voice recognition on a standard telephone.

"That's really a great solution," Capossela said, but wouldn't say whether Microsoft would offer a similar approach to other Office applications such as Word and PowerPoint.

Google, for its part, already offers Google Docs and Spreadsheets, a lightweight, Web-based word processing and spreadsheet program, with the company also making moves to expand to presentation software.

Although it faces competition from Google and OpenOffice--whose offerings are free--Microsoft continues to see strong sales in the unit that includes Office. The Microsoft Business Division, largely on the strength of Office, grew its revenue in the most recently reported quarter to $4.8 billion, up from $3.6 billion in the same quarter a year earlier. Operating income grew to $3.4 billion from $2.4 billion a year earlier.

Capossela did say that it doesn't see a distinction between desktop productivity software and Web-based productivity software.

"We're very happy to be the leading vendor in the space and we want to continue to be the leading vendor in the space," he said. "We look at everything from ad-funded software to Web-based software to servers. Long term the way we differentiate from Google, it's the combination of all three: client, servers and services that is the winning strategy."

See more CNET content tagged:
Microsoft Office Live, Microsoft Works, Microsoft Office, Google Docs, Steve Ballmer

108 comments

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Here's an idea
Sell the Outlook/Word/Excel bundle (aka Student & Teacher) to businesses for the same price ($119.00).

Out of 200+ Windows users I have three powerpoint users and zero Access users. That's why the bulk of them use OpenOffice.org. MS Office just isn't worth $350+ when compared to OOo.
Posted by rcrusoe (1305 comments )
Reply Link Flag
How...
... do you address the limitations of "OpenOffice.org" when it comes to the question of the need for some simple but sophisticated computations that both it (OpenOffice.org) and the Microsoft Office bundle appears not to be able to address today!
Posted by Commander_Spock (3123 comments )
Link Flag
Re: Here's an idea
Yea, I'm using OOo on my PPC-based Mac and it's not half bad. No sense in paying that much money for something that you just don't need.

OpenOffice does great for all of the everyday things I need to get done.

Charles R. Whealton
Charles Whealton @ pleasedontspam.com
Posted by chuck_whealton (521 comments )
Link Flag
You are mis-informed
The last time I calculated, the Cost of an Academic License for MS Office is 25% of, not off, the retail price, depending on version or suite.

<a class="jive-link-external" href="http://www.dealtime.com/xGS-microsoft_office_academic" target="_newWindow">http://www.dealtime.com/xGS-microsoft_office_academic</a>

<a class="jive-link-external" href="http://www0.shopping.com/xPC-Microsoft-Microsoft-Microsoft-Office-Professional-2007-269-11095" target="_newWindow">http://www0.shopping.com/xPC-Microsoft-Microsoft-Microsoft-Office-Professional-2007-269-11095</a>
Posted by piggyshark (11 comments )
Link Flag
Here's an even better idea...
...why don't they just make Works so that it exports actual .doc
files (Like Text Edit does right now in OSX)? That would be the
only real threat to the expansion of OOo.

But then, most home users have no real need for MS Office. Most
work users have no need for the bloat and expense that MS
Office adds to the bottom line. It'd be easier for most offices to
use OOo for the majority of their userbase, at least until they
can convert their stuff to an actual open format to complete the
transition to OOo. (evil grin).

/P
Posted by Penguinisto (5042 comments )
Link Flag
he's right-and so is MS; a "light Office" will work
Isn't that what Google Docs is anyway? And Zoho? Sure, over time it'll ALL get more powerful, but for the real Power User, the hard drive-based Office will probably be the "Real Thing" for quite a while. And yes, why not offer a simpler Office Standard for Small Business and Home users too, for about $125..
Posted by SWtester (6 comments )
Link Flag
Here's a thought
Try to sell an office suite without a presentation and a database application for any price you want. Out of dozens of Windows users I have all of them using PowerPoint and some Access and out of 2000+ business users you probably have all of them using PowerPoint and 1500+ using Access. That's why MS Office if the market-leader by far. OOo just isn't up to MS Office when it comes to features, productivity and overall quality, you get what you pay for.
Posted by Fil0403 (1303 comments )
Link Flag
How pathetic
MS is publicly pondering how to rip off customers?
Why am I not surprised, they are doing the same thing with the completely pointless home server nonsense.

Even businesses don't use most of the bloat, excuse me, features of Office.

What they need to do is offer a very stripped down version(even more so then the student and teacher edition) that caters to the home user. Add in good integration support for both Outlook, OE, AND Thunderbird. Decent integration with a few household level graphics editors, and maybe a simple version of Money. Along with that tighten up the vulnerability to macro viruses, since the potential users don't have an IT department to spend most of the day plugging holes.

Make it truly easy to use and make it secure, and price it fairly, not something MS very often does. does. Say in the $30-$50 range, and MS will finally have a winner.

However, if they continue this narcissistic push against consumer interests, they will find themselves further down the path of failure that they already are.
Posted by MSSlayer (1074 comments )
Reply Link Flag
And
Offer it on Windows, OSX, and Linux. Platform dependence is so 1996.

Windows market share is dropping and it will continue to drop. If their applications want to stick around they will have to play nice with the up and comers.

No Spock, that does not include OS/2.
Posted by MSSlayer (1074 comments )
Link Flag
I like the suggestion
"What they need to do is offer a very stripped down version(even more so then the student and teacher edition) that caters to the home user."

I agree. Most home users do not use the majority of features. And if they do this and it's successful (I think it would be very successful), you will be kicking yourself for suggesting it to them, won't you?
Posted by Seaspray0 (9714 comments )
Link Flag
Yes MSLaymer is Pathetic
"further down the path of failure that they already are." -- The Most Brilliant MSSlayer.

And I suppose Starbucks sucks at making coffee too? Failure? Just because they don't crap in a box and call it Open Office fulfilling your every fantacy doesn't mean they are failures. What is MS Office's market share? How much does Microsoft make off of Office every year? I'd love to "fail" that well.

The only thing you are slaying here is yourself...
Posted by kojacked (1129 comments )
Link Flag
You go with the also ran people,
I'll stay with a winner. It is ture O office does what most home users need. In the business world, not a chance. In other word, you get what you pay for. If you want cheap imitations, go for it... if you want the real deal, well you gotta buy it. You want something for nothing? Try the failed scocialism thing. Good luck.
Posted by suyts (824 comments )
Link Flag
Another version
People rip M$ already for putting out to many versions of one product.
Posted by DrtyDogg (3084 comments )
Link Flag
Huh, Define Failure?
I think the market makes its own choices. RE: Office group = 33% growth in revenue and 50% growth in profit. How do you define failure?

"Although it faces competition from Google and OpenOffice--whose offerings are free--Microsoft continues to see strong sales in the unit that includes Office. The Microsoft Business Division, largely on the strength of Office, grew its revenue in the most recently reported quarter to $4.8 billion, up from $3.6 billion in the same quarter a year earlier. Operating income grew to $3.4 billion from $2.4 billion a year earlier"
Posted by Shakingmy head (48 comments )
Link Flag
And, The Winner Is: The Bush Administration.
"While those economics may indeed be true, Capossela pointed out that it's not just about revenue. One of the challenges is whether people really want to see ads when they are in a spreadsheet or word processing program.

"You can't just apply the economics,"; just notice how many times it was mentioned in these two paragraphs that it is -- All About The "economics..." (with the "functionality" (ERR) yet to appear in the MS "spreadsheet") Duh! Now they are really thinking.
Posted by Commander_Spock (3123 comments )
Reply Link Flag
OS/2 Wart
OS2 go OS2 go OS2
Posted by t8 (3716 comments )
Link Flag
The winning strategy?
But Microsoft is losing.

They don't truly understand the Internet and never have. They have to focus too much on their core offerings (Windoze and Orafice).

Google is 110% focussed on the Internet and hence why they are gaining ground and are dominant on the Internet. Everything Google does makes sense and dollars. They can untilise the Internet for all it's advantages.

Microsoft cannot do that because they cannot afford to put a gun to Windows and Office's head.

Therein lies their problem. They are making too much money from legacy products and they can't afford to change the paradigm, but this strategy will also guarantee that they lose in the end because the Internet is the future of software and services.
Posted by t8 (3716 comments )
Reply Link Flag
MS is shortsighted
because they think they have to compete with Google.

MS believes that it has to be the biggest baddest bully on the block.

It doesn't.

Web services is not going to catch on as much as some people think. All web services does is offload the problem while adding a problem of trust.

Web services is fine for some things, but no sane business is going to place its future on it. If the internet connection goes down, it is out of business for a day. They are also trusting the security of their data with an invisible third party. They are also entrusting that security is strong enough to beat out common attacks like man in the middle.

What is the web service company disappears along with all your files? It can and will happen.

It is much safer and easier to keep things in a network that you own, then have to reach out across the internet to access data.

The problem is that MS is too slow and too dumb to change how it needs to. It can't think outside the very small and vanilla box it put itself in.
Posted by MSSlayer (1074 comments )
Link Flag
lol
"They don't truly understand the Internet and never have." Who invented tcp/ip? Yeh, the stuff that makes the internet go.
Posted by suyts (824 comments )
Link Flag
how about fixing office first?
most people use old versions of office because that's all they need. quit adding 'ribbons' and other unnecessary crap to the product and concentrate on fixing the things it's 'supposed' to be able to do (and quit removing features it already DID do), and maybe you can get more people to use it.
Posted by megustansalchichas (153 comments )
Reply Link Flag
MS=Mighty Stupid
"Microsoft eyes new ways to sell Office"

Here's an idea-lower the damn price! Even a hundred plus dollars for the student edition is too much. MS seems to be thinking of everything it can to get people to use their products, except for the most obvious one; make them more affordable! It's not like they're hurting for money! Wouldn't it make sense to lower the price of a product, and maybe even take a slight loss for a while, to promote sales and get people hooked on that product?

Is it any wonder that OOo is such a popular alternative. That's what I use, and I love it. Best money I never spent!
Posted by anomalator (83 comments )
Reply Link Flag
Everything you say is true, but...
Everything you say is true, but Microsoft still have a lot of momentum behind them and they will never give that away for anything. They will milk that cow for as long as they can. But they know that software in a box for hundreds of dollars is a dying strategy.

The thing is though that there are still a lot of silly people out there who are buying these legacy products. These people have no idea and Microsoft will continue to rip them off while they remain unwise to where the market is now and todays price expectations.
Posted by t8 (3716 comments )
Link Flag
They should rather switch to OpenOffice.
They should rather switch to the free and now fully featured alternative : OpenOffice !

It meets the needs of nearly all Office users and it reads and writes Microsoft Office files too. It's a little less pretty, but it gets the job done well. Ain't that what matters ?

<a class="jive-link-external" href="http://www.openoffice.org/" target="_newWindow">http://www.openoffice.org/</a>
Posted by My-Self (242 comments )
Reply Link Flag
Open Office is garbage!
I know that Open Office is communist garbage, Microsoft has told me. How can anything that is free be any good. If any of us use Open Source software, the terrorists will take over the world.

Microsoft Office has many useful features that Open Office will never have. Does Open Office have Microsoft bob, or a talking dog to tell me what to do? No!

I will stick with talking dogs.
Posted by ralfthedog (1589 comments )
Link Flag
Not as good as Lotus on OS/2
because OpenOffice does not support the ERR function that most banks need.
Posted by Labor Rations (7 comments )
Link Flag
no it "ain't" what matters
I does have to look good in a business environment. Open office might be good for your own personal stuff but you cant send your boss or collegues the crap that open office puts out.
Posted by Stacy.Downing (1 comment )
Link Flag
It is yet another attempt to try and control the world
by forcing others to use MS-Office. Of which Excel does not have an ERR or IRR formula yet. Which is a conspiracy against banks, like the one I am CIO of, that runs OS/2 using Lotus 123.
Posted by Thought Police OMalley (16 comments )
Reply Link Flag
IRR...
Not sure about ERR, but excel has formulas for IRR, XIRR, and MIRR

=irr(values, guess). The guess helps if you have an estimate for the rate of return, since excel has to iteratively attempt solutions. Maybe that will help you get off OS2...sorry commander.
Posted by gp2792 (176 comments )
Reply Link Flag
"Not sure about ERR, but...
... Excel has formulas for IRR, XIRR, and MIRR. If you are saying that you are "Not sure about ERR"; then, how will you evaluate a project (using Excel) requiring international considerations as you convert your values from IRR to ERR? What is there to be "sorry" about since as you "may" know as far as the banking industry is concerned its either somethings (numbers...) are there or they are not - just as it is either you know how to do something or you do not know how to do it!
Posted by Commander_Spock (3123 comments )
Link Flag
NeoOffice
Works for me. Cool icon, too. :)
<a class="jive-link-external" href="http://www.neooffice.org/neojava/en/index.php" target="_newWindow">http://www.neooffice.org/neojava/en/index.php</a>

Neil Anderson
<a class="jive-link-external" href="http://www.cyclelogicpress.com" target="_newWindow">http://www.cyclelogicpress.com</a>
Posted by cyclelogicpress.com (107 comments )
Reply Link Flag
No more Office Franchise
Claiming an "Office" franchise at this late stage is futile. It no longer exists. There is no longer any exclusive need to get "Office" to create and work with compatible Office documents.

Microsoft will just have to go back to selling a product that offers value for money, and at the price their selling Office, that would have to be a heck of a lot of value.
Posted by Maccess (610 comments )
Reply Link Flag
Check out these bloated prices for MS SW
Just did a quick check on suggested retail pricing for office... (prices are in canadian $)

Office 2007 pro $759
Project 2007 $885
Visio Pro 2007 $829

$2473(!!!) for software that doen't do much more than it did over 5-10 years ago. Thats highway robbery. There haven't been any major innovations in the software in that period either, for the most part MS has just cleaned up the functionality, added some eye candy, and bloated the hell out of it. My use of office today is pretty much what it was using office 2.0 in the early 90's. And back then it cost a fraction as much then thanks to competition from Corel and Word Perfect.

My new computer didn't even cost that much, including the 3 year next day onsite complete care warranty and the $170 for Vista Ultimate (don't even get me going on that waste of $$$)

Clearly MS is in farming mode on their software, just as the record industry is on CDs. Guess what I now run on my home PC? Yup. Open Office. Any non-idiot is either going to do that, or pirate their ms sw.
Posted by kman2007 (1 comment )
Reply Link Flag
You forgot one bit of added "functionality"
Don't forget that M$ has frequently added the "functionality" of making their new and improved applications have compatibility issues with older versions of their own software, thus prodding users to upgrade.
Posted by hounddoglgs (74 comments )
Link Flag
Shut up and pay MS
Anything else means you are a socialist.

Or something like that. :p
Posted by qwerty75 (1164 comments )
Link Flag
Warped Reality
(Sorry no OS/2 here Commander.)

Let's see Microsoft:

1. Owns on the desktop
2. Owns in productivity software
3. Is making a grip of money

and yet are a "failure" because their haters deam their software as lacking quality, bloated, and too expensive?

If Office were weak like Open Orifice then people would be laughing at how lame Microsoft was (but it would be cheap/free!) Quality? Open Orifice crashes like any other turd out there. Quality is so subjective anyway you can never loose a quality argument (unless you are lame). Let's see some actual statitics you Microsoft haters rather than unqualified "people are noticing, switch from Microsoft products".

Every time Microsoft comes out with a new version of Windows or Office the same baseless negative comments are made yet Microsoft continues to dominate. Oh, my bad! That's because they are evil! Duh! I'm so stupid... I better go back to using my iPhone; what? say again? I can't hear you! Speak up! Did you say quality?
Posted by kojacked (1129 comments )
Reply Link Flag
You go, dawg!
Why are so many folks threatened by MS success?

Who cares if they're pure evil? Who cares if they dominate? Who cares HOW they dominated? Who cares if they're predatory?

If you like MS products...then THEY WON!!!

If you don't like MS products...then IT DON'T MATTER!!

There is NO SUPREME TRUTH to all of this.

It's just small talk...over...and over...and over...ad naseum.
Posted by Kings X Rocks! (89 comments )
Link Flag
Actually, and in all seriousness, here's reality:
[i]"Every time Microsoft comes out with a new version of
Windows or Office the same baseless negative comments are
made..."[/i]

Baseless?

Well now, perhaps you can show us how the following bases are
irrelevant. We'll start with Vista:

* DRM.
* Higher hardware requirements for the same features on other
OSes.
* Far higher hardware requirements just to get promised
features.
* Insanely late ship date (3+ years late).
* A codebase which can be credibly proven to be naught more
than rehashed XP/2k/NT - based.
* widespread driver incompatibilities.
* Far less security than promised, while other OSes maintain a
superior inherent secure structuring.
* a buggy and faulty WGA (in irony, becuase this comes from a
company who only got where they are because their products
were pirated widely. I don't condone piracy, but facts are facts,
and a reactionary habit of treating paying customers like
criminals is a dumb move on their part IMHO).

[i]"Is making a grip of money..."[/i]

Actually they have exactly two profitable divisions: Windows and
Office. The rest are hemorraging money badly. Problem is, of
those two pillars, Windows isn't making them the bank that they
had expected it to; widespread and credible analyses show that
Vista is failing (see also Dell reverting to XP as an option and
selling Linux pre-loaded -- by customer demand -- as a huge
for-instance).

Meanwhile, Office 2007 doesn't seem to be getting the
widespread adoption that MSFT expected it to (hence this article,
among many others like it).

To be honest, I hold no hatred for the company. I merely know
of and use far superior alternatives. It isn't just me, either... in
regards to your demand for statistics, take a peek through
recent articles here: A HUGE percentage of Windows' developer
mindshare has fled Microsoft, and appears to be growing.
Developers go where the money and potential is, which is
telling.. Dell, in an environment where OEMs run on thin margins
and do what MSFT tells them to out of sheer survival instinct,...
now sells Linux preloaded on their machines. Microsoft is selling
SuSE Linux vouchers now in partnership with Novell.

I can understand how separately most folks wouldn't grok what's
going on, but put them together... and it's a damning picture.

/P
Posted by Penguinisto (5042 comments )
Link Flag
Spock was always flaky
But now he is downright insane.

In his one man crusade to bring back a dead OS, he has met scorn and total disinterest.

So now he has finally broke, and created several accounts to "back himself up".

It is quite sad really. Is there anything more sad then replying to yourself?
Posted by qwerty75 (1164 comments )
Reply Link Flag
Oh, damn...
...and here I was about to nominate the guy who wrote the talkbot for the Turing Prize (and to think that he was so close, too...)
Posted by Penguinisto (5042 comments )
Link Flag
Living in "Self Denial"...
... must be a hell of a thing for some folks like "qwerty75" so much so in their affliction that they loose focus on the topics at hand; here it is that the heading of this CNET NEWS Article which clearly states: "Microsoft eyes new ways to sell Office"; and, "qwerty75" like the clever spin-doctor he thought he was and is relentlessly attempting to convince the intelligentsia that Commander_Spock (like the good educator/instructor he is) is on a "one man crusade to bring back a dead OS". "qwerty75" or who ever you are, please be so focus as to look at the subject line of this thought provoking CNET NEWS article on Microsoft new plans "to sell Office" and give us you thoughts; and, if you sound convincing enough then you will not give the impression that you are in need of some psychological help!

The real OS battle has not yet began and yet you are now believing things that are unreal. So sorry about your deterioration...; but, the Commander_Spock and Crew felt you provided us good entertainment; but, as sad as it is -- when it is time to give up the "key-boards" you have got to do just that in order to uphold your reputation. (Spend plenty of time outdoors, it is Summer). Also, take an hint from Bill Gates because generations Y, Z... might lay blame on you for their mis-education!
Posted by Commander_Spock (3123 comments )
Link Flag
Good lord
The blasted office suite is fancier than needed for local use, and too big and sloppy, and bandwidth hungry, for wide area use. I sure don't need more bells and whistles to sort through. <P>

Come on, corporate. Switch to Open Office.
Posted by Phillep_H (497 comments )
Reply Link Flag
I guess if you can get away with it ......
Office 2007 adds very little to Office 2003. In factsome of the new features are downright annoying. At best the changes are cosmetic. Some people always want the latest and are willing to pay whatever it takes to get it. I can't figure the attraction but what do I know? I do know that more level-headed people will not pay the very high license fees and will stay with perfectly good earlier versions or migrate to Open Office. The only publisher more outrageous than Microsoft is Adobe whose fees can rival the national debt.
Posted by rich015 (5 comments )
Reply Link Flag
I guess if you know nothing about what you're talking about...
LOL, just from your first sentence any actual Office 2007 user can easily see you have never tried Office 2007. In fact, all of the new features are very useful for people who have a brain (and use it). It's rather amusing most people who bash Office criticise the fact that Microsoft changed too many things and you claim the changes are cosmetic at best, LOL. Some people always want something non-Microsoft and are willing to humilliate themselves in public bashing something they have never tried and know nothing about. I can't figure the attraction either, but, anwering your question of "what do I know?", at least regarding Office 2007 you know absolutely nothing, LOL. I do know that more retarded people will not use anything Microsoft and will stay with outdated earlier versions or migrate to crappy alternatives like OpenOffice that don't even offer an e-mail client. The only bashing more ignorant than Office is those comments about Vista, whose comments regarding it can rival Paris Hilton's IQ.
Posted by Fil0403 (1303 comments )
Link Flag
 

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