Microsoft girds Office 2010 with free Web versions

Choosing to risk cannibalizing its own sales rather than let competitors such as Google Inc. eat away at them, Microsoft Corp. will give consumers and corporate users free access to the upcoming Web version of Microsoft Office.

Microsoft announced that its Office Web service will be available to members of its free Windows Live online service, of which there are about 400 million active users worldwide today, says Chris Capossela, senior vice-president of the information worker product management group at Microsoft.

Office Web will also be free to enterprise workers, provided they are licensed for Office's software maintenance program, called Software Assurance. There are 90 million such workers today, Capossela said.

Office Web will also be available as a paid standalone service competing with Google Apps, which came out of beta last week.

To accommodate the three new Web versions of Office, Microsoft will reduce the number of client versions of Office 2010 to five from eight in Office 2007.

At its annual Worldwide Partner Conference in New Orleans, Microsoft will also announce that Office 2010, along with related Office products SharePoint Server 2010, Visio 2010 and Project 2010, have reached the technical preview stage. It will begin inviting tens of thousands of people to begin testing the Office 2010 suite, which is expected to ship in the first half of next year.

A beta for the remaining Office 2010 products, including Office Web, will begin by the end of the year, Capossela said.

Fear of a free Web

Microsoft has long been viewed in many quarters as being afraid of moving Office to the Web for fear of killing the goose that lays golden eggs.

Office generates about $15 billion to $20 billion a year for Microsoft, which is second only to Windows.

Despite its aggressive, albeit-belated move, Microsoft isn't endangering its Office sales, Capossela said.

For one, Office Web will only offer lightweight versions of Word, Excel and PowerPoint that lack many features. Even the most price-sensitive consumers will still want to buy a fuller-featured, easier-to-use client version of Office, Capossela said.

“If you talk to a student who is writing a ten page class paper, writing something that long in a Web browser is probably not the best experience,” he said.

Microsoft has long offered lower-end products that in theory could have — but did not — cannibalize Office, such as Works or WordPad, said Capossela.

He said that even if consumers and small businesses move en masse to Office Web, that won't be so bad, since the revenue per customer wasn't that high. Many were using older versions of Office or simply pirating the software, he said.

Microsoft Office: Now with free Office Web!

Microsoft's most lucrative Office customers — enterprises paying for Microsoft's Software Assurance — will be rewarded with free access to Office Web.

These customers can either get it hosted for free on Microsoft's servers or, Microsoft said for the first time, in their own corporate data centers.

“This is a big differentiator from the Googles and Zohos of the world, who say you have to run it in our cloud,” Capossela said. “This gives [enterprise] customers choice, as a lot of them will want to run [Office Web] themselves.”

The third way customers will be able to get access to Office Web is through a paid subscription. This option would be aimed at small businesses who need more security and control over their documents than the free Windows Live version provides, said Capossela.

He declined to reveal the price of the paid service. The supported Google Apps Premier Edition, by comparison, costs $50 a year.

Microsoft will let all of its partners resell this version of Office Web, but only a select few will be allowed to host Office Web as well, Capossela said.

This is something Microsoft is already allowing some partners to do with its Business Productivity Online Suite (BPOS) service.

On the chopping block

The three versions Microsoft plans to eliminate from Office 2010 include Office Basic, a low-end version offered for pre-installation by PC makers, Office Small Business and Office Enterprise, a corporate version that made its first appearance in Office 2007.

That leaves three main flavors for consumers and small businesses:

Office Home and Student, which includes Word, Excel, PowerPoint and OneNote. The subject of many promotions targeted at price-sensitive students and households, Office Home and Student has been Microsoft's best-selling retail version for the past three years, Capossela said. Office Home and Business, a new version which includes the four apps in Home and Student along with Outlook 2010. Office Professional, which includes the five apps in Home and Business, plus Access and Publisher.

For enterprises and large organizations that license Office in volume, Office 2010 will come in two main versions:

Office Standard, which includes 6 apps — Word, Excel, PowerPoint, Outlook, OneNote, Publisher. Office Professional Plus, which will include access to all of Office's ten client apps: Word, Excel, PowerPoint, Outlook, OneNote, Publisher, Access, InfoPath, Communicator, and SharePoint Workspace (formerly known as Groove).

Microsoft has not revealed prices for the various versions of Office, which in the 2007 edition, ranged between $149 and $499 at list price.