Rivals make run at Microsoft Office

Is the multibillion-dollar cash cow vulnerable at last to alternatives? Google, Yahoo and IBM seem to think so.

After years of watching Microsoft rake in billions of dollars from its desktop software franchise, its competitors are pouncing.

IBM on Tuesday announced the release of Lotus Symphony, a suite of free desktop applications based on the OpenOffice.org open-source product.

The computing giant, which has been challenging Microsoft's desktop dominance for years, said that Lotus Symphony is a standards-based alternative to Microsoft's proprietary Office.

Separately, on Monday afternoon, Yahoo said that it paid $350 million to acquire Zimbra, a start-up that developed a Web-based e-mail and collaboration package comparable with Microsoft Exchange and Outlook.

Meanwhile, Google on Monday introduced Google Presentations, an online version of Microsoft's PowerPoint presentation application that complements Google's Web-hosted document editor and spreadsheet.

The flurry of investment in productivity software points to technology and business changes in the IT industry that are making Microsoft's cash cow vulnerable to alternatives, particularly among small businesses and consumers.

But don't expect Microsoft coffers to start draining tomorrow. Analysts expect Microsoft to retain the great majority of its Office customers as it adjusts its product development to the Web and open source, even as competitors try to siphon off its Office revenue.

"I think there's some blood in the water between Microsoft not getting its Open XML (Office document formats) fast-track standards approval and the European Commission ruling," said Michael Silver, an analyst at Gartner, referring to two recent Microsoft setbacks.

Microsoft failed to get its Office Open XML formats certified as ISO standards through its accelerated process earlier this month. On Monday, the European Commission ruled in favor of regulators in an antitrust case that could change how Microsoft does business in Europe.

Microsoft has shown some signs of reacting to the full-court press it's seeing from competitors.

Last week, it made a version of its Office suite available to students for $60. It is also developing Office Live, a set of online services that complements Office and is aimed at small businesses.

A Microsoft spokesman on Tuesday said that Office meets its customers' needs because the company continues to invest in it.

"Competition is good for the industry and good for customers. That said, Microsoft Office continues to be the overwhelming choice for a broad range of organizations and individuals," said Jacob Jaffe, director of Office at Microsoft. "Microsoft Office has changed as people's work has changed, and the alternatives for the most part have aimed to meet the needs of the past."

Low-risk volley
IBM on Tuesday offered up beta versions of the Lotus Symphony applications--a document editor, spreadsheet and presentation program--to end users and business customers for free download.

The applications run on Windows and Linux, and a Mac version is planned.

IBM executives said that the company's backing of OpenOffice-based software and the open-source project is similar to its decision in the 1990s to push Linux into businesses.

For support, the company is pointing its customers to online forums on its Web site.

But company observers expect IBM to start to make paid support services available to large customers.

"If (Lotus Symphony) destabilizes Microsoft's Office business, that's a huge win and the potential risk for IBM is essentially nil."
--Stephen O'Grady, analyst, RedMonk

For IBM, which makes about half of its revenue from professional services, pushing into desktop software with Lotus Symphony is a low-risk way to try to upset the balance of power using standards as a lever, said Stephen O'Grady, an analyst at RedMonk.

"If (Lotus Symphony) destabilizes Microsoft's Office business, that's a huge win and the potential risk for IBM is essentially nil because it's not a business where they are competitive anyhow. And it won't cannibalize any of its own products," O'Grady said.

Realistically, Lotus Symphony applications don't have the same advanced features found in Microsoft Office.

IBM said the programs are designed for ease of use and to be easily integrated with other applications. In addition, IBM made pains to point out that the programs support OpenDocument Format, or ODF, a standard document format. They also will work with Microsoft Office documents and Adobe Systems' PDF.

Stripped-down productivity applications could have an appeal in some corporate computing situations, such as small businesses or companies that don't want to pay a full Office license for employees who rarely use the suite, some analysts said.

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