Microsoft Office earned $4.2 billion revenue in the first three months of 2010, only a little behind the Windows client at $4.4 billion, according to the company's most recent earnings release.
The figures show the suite remains deeply embedded in the business world, despite the availability of free or much cheaper alternatives that perform many of the same functions.
Microsoft is hoping to keep the train on the rails with Office 2010 and its server companion, SharePoint 2010, both formally launched today. I've already reviewed the suite (here and here), and little has changed since the beta and release candidate.
The real question is this: has Microsoft done enough with Office 2010 to maintain its cash-cow business against three major competitors: Google Docs, OpenOffice and, well, Microsoft itself.
First, Microsoft. There's little wrong with Office 2003, the last version to sport traditional menus as opposed to the chunky ribbon introduced in Office 2007. The ribbon does have advantages, making buried features more visible, but it also consumes more screen space (especially not good on a netbook), and it increases upgrade friction. Toolbar customization is another sore point: the drag-and-drop Customize dialog in Office 2003 and earlier is better than the ugly Customize Ribbon dialog in Office 2010.
How we hated you, Clippy
With each new release, Microsoft adds countless new features it says make us all more productive. But how many new features actually matter? While researching this article and looking at Office 2010, I ran up Office 95 - the first complete 32-bit version. It's an advanced product for word processing, spreadsheets, and presentations - and it launched fifteen years ago.
Much of the progress since Office 95 has been about refinement and ease of use, rather than functionality. Not all those efforts have been successful, and the history of Office is littered with new features, hyped as breakthroughs at the time, which have faded from view thanks to disuse or failure. We've had Office Binder, the Tip Wizard, Clippy the Office Assistant, Adaptive Menus, Smart Tags, and in Access, Data Access Pages, and Access Data Projects.
Office has also added new applications over the years. Outlook is the most used Office component according to Microsoft, despite its bewildering user interface. If Exchange is the email server, nothing else will do. OneNote is a nice extra, especially on a Tablet PC, and it's substantially improved in Office 2010 with multi-authoring and notes that link to other applications. InfoPath is useful for corporate forms, though it has little to do with creating and managing documents, which is the primary purpose of Office.
When I'm 64
Having said all that, there are some real improvements in Office 2010. This time round, there are Excel Sparklines, for example, single-cell charts that are very effective. The arrival of 64-bit Office is also significant, even though Microsoft is warning most users not to deploy it because of add-in compatibility problems. For most users though, these things in themselves are insufficient to justify an upgrade.
The second major competitor to Office 2010 comes from open source. OpenOffice is free and cross-platform, so why pay? If you need just the essentials of a productivity suite it is a fair question, but a few factors keep users on Microsoft Office. One is document compatibility: keeping up with Microsoft's format changes is hard enough, and introducing a third-party product seems risky.
Word 2010 takes to the web, with Office Web Apps
Another is the Microsoft lock-in, with hooks between Windows, Office, SharePoint, and Exchange that inhibit change. Finally, Microsoft Office is familiar, capable, and polished, and even the attraction of free is not enough incentive to change. Just in case though, Microsoft will be offering Office Starter, a basic edition of Office 2010 supported by advertising, though I await a copy to test.
If anything will unsettle Microsoft Office, it it's likely to be the third competitor, the cloud - and especially Google Docs. Office 2010 is Microsoft's first real attempt to match Google's in-browser document editing and collaboration, with Office Web Apps. Enterprises can run these as a SharePoint add-on, though a per-user volume license for Office is required even for Linux users, while small businesses and consumers get access for nothing via Windows Live. Microsoft also has something Google lacks, which is offline use and synchronisation via the new SharePoint WorkSpace.
Although Office Web Apps are underpowered in their first release, if you put them alongside the SharePoint-2010-powered co-authoring and offline features in desktop Office 2010 then you get a strong collaboration platform. The Web Apps also give Microsoft some sort of solution for non-Microsoft mobile devices such as the Apple iPhone or Google Android.
It is this that makes Office 2010 actually interesting, and it will justify an upgrade.
That said, when it comes to the cloud, Windows and Office form what tech publisher and uber-conference organizer Tim O’Reilly calls a strategy tax.
In other words, everything Microsoft does is constrained by the need to sustain its desktop business. So every two years, Microsoft cranks the handle and tries to convince customers to migrate to its latest revamp of Office and SharePoint.
Microsoft has proved it knows how to drive upgrades and how to compete with free. Can negotiate the transition to the cloud using Office 2010 without shrinking its desktop Office business? We'll see. ®