October 29, 2002 5:11 PM PST

Microsoft to limit access to Office 11

The next version of Microsoft's Office software will run only on the latest releases of the company's operating systems, Microsoft confirmed Tuesday.

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A representative acknowledged that Microsoft plans to offer the productivity suite, code-named Office 11, only for Windows 2000 with Service Pack 3 and Windows XP.

Microsoft started beta testing Office 11 last week, but some early participants found that they had been dropped from the program if they had planned to use older versions of Windows. They were dropped because Microsoft doesn't plan to offer Office 11 for Windows 98, 98 Second Edition, Me or NT. The Redmond, Wash.-based company already dropped support for Windows 95 with the release of Office XP in May 2001.

"Office 11 Beta 1 is a typical early beta release in that the product is still in progress," Microsoft said in a statement. "As with any beta release, Microsoft will receive a lot of feedback from beta testers, and many of these suggestions may be worked into the final product."

Depending on feedback during the testing process, Microsoft could choose to extend support to some older versions of Windows, but right now that is not the plan, the representative said.

BetaNews on Tuesday reported that in a newsgroup posting for beta testers a Microsoft representative said Office 11 would run only on Windows 2000 with Service Pack 3 and Windows XP.

Limiting the final version of Office 11 to Windows 2000 and XP would potentially encourage users of older operating systems to upgrade, but it could further erode relations between Microsoft and business customers already stung by increases in volume licensing fees, analysts say. Some business customers have indicated that they may explore alternatives to Office, such as Sun Microsystems' StarOffice and OpenOffice, because of Microsoft's licensing plan.

Many companies have complained of feeling forced to sign up for the new program, known as Licensing 6. Market researcher Gartner estimated the program raised the majority of Microsoft business customer rates from 33 percent to 107 percent.

"It's definitely a perception issue," Gartner analyst Michael Silver said of Microsoft appearing to push its customers around. "In a lot of things Microsoft does, there are perception issues like that."

Beyond sour customer relations, gauging the impact of such limitations on Office 11 is more difficult to project than it might seem, analysts say. At the end of 2001, Windows 2000, Windows XP Home and Windows XP Professional accounted for only 20 percent of the operating system's installed base, according to IDC. That number could double by the end of 2002.

That means that when Microsoft releases Office 11 in mid-2003, half or more of people running Windows would have to upgrade to a newer version before installing the new product. For Microsoft, which financially stands to gain from customers upgrading to newer versions of Windows, limiting Office 11 to the newer operating systems could be important for getting laggards to upgrade.

"I could see some advantage for Microsoft, at the cost of some customer acceptance," said Paul DeGroot, a Directions on Microsoft analyst. "For some customers on something like Windows NT Workstation, it makes the decision (to upgrade) easier for them."

In the server market, Microsoft estimates that Windows NT accounts for 15 percent of the install base. The percentage of Windows NT Workstation users could be much higher, but IDC declined to specifically break out the numbers.

Looking ahead
IDC analyst Al Gillen cautioned not to read too much into the expected large percentage of people running older Windows when Microsoft is expected to release Office 11.

"From a corporate perspective, even if Microsoft releases a new product it doesn't mean people are going to just run out and get it," he said. "So you're really looking a year out from the release date before corporations move to it in any volume."

Gartner's Silver noted that consumers could be in for trouble "if Microsoft cuts out Windows Me support for Office 11." But consumers, like businesses, tend to upgrade their productivity suite with the purchase of a new computer and operating system.

"When you look at the timing from these two perspectives, it's not as bad as it might appear today," Gillen said.

Dropping support for older versions of Windows would be consistent with Microsoft's past behavior and efforts to move Windows to a single code base. The consumer and business versions of Windows XP, for example, share the same lineage as 2000 and NT, which are considered to be 32-bit operating systems. In the past, Microsoft supported two separate code bases, one for businesses based on Windows NT and another for businesses and consumers based on Windows 95.

"It looks like Microsoft is sort of moving support for operating systems to 32-bit OSes," DeGroot said. "It may make (Office 11) a more stable release if it's on these fully 32-bit platforms."

By focusing on development for the single Windows code base, Microsoft could conceivably deliver a better version of Office and cut development costs in the process. But the company also has a tendency of being heavy-handed with customers who resist making the transition to a newer operating system.

"It's not the first time they've done it," Silver said. "Office XP wouldn't install on Windows 95. In fact, they built something into Office XP so that it wouldn't install on Windows 95."

Silver said a repeat performance with Office 11 would not be surprising, in part "because all support for Windows 98 and NT end on June 30, 2003. This is certainly in keeping with the lifecycle of Windows. If they don't support a version of Windows, why should they continue to support an application on that version of Windows?"

Gillen agreed. "How long should a company be obligated to be backward-compatible--until the end of time?"

 

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