MS to Face Challenges With Free, Web-based Office 2010

Dennis Faas's picture

Microsoft is set to launch their latest software suite, Microsoft Office 2010, which is slated to be released next month. (Source:

In an effort to compete with Google's 'Google Docs' software, however, Microsoft is releasing an alternative version of Microsoft Office, called Office Web Apps. The Office Web Apps version is available to the public at no charge, but will be supported by advertisements instead of a per-user license fee.

Google Docs, Google Apps, compared to MS Office

Google Docs is essentially a stripped-down version of a web-based word processing, spreadsheet and presentation software bundle designed to compete with Microsoft's comparably pricey Office Suite. Google Docs saves each file on a Google server, meaning that people can have access to their files from any PC or device rather than having to store them on a specific computer or memory stick.

Compared to MS Office, Google Docs has always been free to the public. Google does however offer an alternative version for businesses, called "Google Apps," in which a $50 per-user fee is charged to businesses annually. Extra features for the licensed version include more security, privacy controls and customer support. It also runs on a network with guaranteed service levels. (Source:

In total, Google believes that more than 25 million people are currently using Google Docs and Google Apps.

Google's Success Trumps Piracy Concerns for Microsoft

The number of users using Google Docs and Apps are a fraction compared to Microsoft's share of the software market, however. Microsoft estimates that 500 million people use older and more recent versions of MS Office, and the company believes that only about half of these Office copies are paid for, with the rest being pirated for shared use. (Source:

Last year, the MS Office software suite accounted for $19 billion in fiscal sales -- more than a third of Microsoft's total $58 billion in sales for the year. It even generated more than half of the company's operating profit: $12 billion of the overall $20 billion.

Now, instead of selling copies of MS Office, Microsoft must look to other money-making avenues such as advertisements served up beside a free office suite in order to stay competitive.

" ... [Microsoft has] an enormous economic model to deal with, and that will hurt them. They have to find a way to go from the traditional software licensing model to a cloud computing model, and there has not been a company that has done that yet to date. It's not to say Microsoft can't do it, but they certainly have a lot of challenges to make that happen successfully," says Google Exec Dave Girouard. (Source:

Microsoft's Office Web Apps is said to be released at the same time MS Office 2010 debuts this June. (Source:

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