It’s open season on Microsoft Office. Google is distributing Sun Microsystems StarOffice, a rival productivity software suite, and also has its own web-based productivity suite called Google Docs and Spreadsheets. As part of its iWork suite, Apple has a new spreadsheet called Numbers that could compete with Microsoft’s Excel. There is also OpenOffice, an open source suite built on the same code base as Sun’s StarOffice, along with several web-based products — such as ThinkFree and Zoho — that have been eyeballing Microsoft’s turf.
So why are rivals targeting Microsoft’s Office juggernaut?
Wharton professors suggest various reasons:
Just shaving a point of market share from Microsoft, some point out, could be lucrative. Others note that strategically, rivals want to weaken Microsoft’s dominance any way they can. Still others point to the fact that good old-fashioned competition is alive and well in the technology industry, and Microsoft is a worthy opponent on many different fronts.
“Office, even more than Windows, is Microsoft’s cash cow”
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Wharton management professor Lawrence Hrebiniak suggests that there is also a little gamesmanship between Microsoft and its rivals. “Another part of the Office fascination is the appeal of going against a giant,” says Hrebiniak. “People want some form of competition.” Google may have additional motives for challenging Microsoft, he says. For instance, Hrebiniak describes Google’s latest effort to distribute StarOffice as more of “a distraction play.” “Microsoft is trying to diversify and attack Google. Google is giving away a rival office suite as a distraction and a way to dent Microsoft. The strategy is not always the most rational between these two. Part of it is a game.”
Customers would rather stick to what is known even if alternatives are simple to use. It’s a habit.” It would take vastly improved software from a rival to encourage customers to switch. “You won’t see Microsoft rolling over any time soon.
Microsoft is also working to make Office more valuable, says Silver, by integrating it with corporate software such as its SharePoint Server, a product that allows customers to collaborate, manage content and communicate online. “Microsoft saw a few years ago that Office was becoming a commodity, so it built backend pieces to go with it. The organizations we speak to are most interested in Office 2007 because of SharePoint.”
That strategy may be paying off. Microsoft chief financial officer Chris Liddell said July 19 that the company’s business division, which includes Office, will show annual revenue growth of 11% to 12%. “The first quarter will continue to benefit from strong customer acceptance of the Microsoft Office system,” said Liddell on Microsoft’s fourth quarter conference call.
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