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Raikes: Office Live beta on track

Microsoft's business division chief explains the Web-based service and acknowledges that an ad-supported rival to Office could soon emerge.

With all the talk of Xboxes and free consumer services, it's easy to forget that the bulk of Microsoft's $40 billion in revenue comes from selling software to businesses.

It's up to Jeff Raikes to keep a good chunk of that money rolling in. Raikes, president of Microsoft's business division, is looking for ways to keep growing the company's mammoth Office franchise--which generates one-quarter of Microsoft's revenue--and protect against a new breed of rivals.

Raikes, who has taken on an expanded role at Microsoft as part of last year's reorganization, spoke to CNET News.com about the company's effort to take on Intuit in the small business accounting arena, its plans for Office Live and whether Microsoft expects Office to face a raft of competition from free, ad-supported rivals.

Q: It's not that long since Microsoft introduced Small Business Accounting 2006. Why is there a need to cut the price so significantly?
Raikes: What surprised us is that, of the businesses that were early adopters, more than 50 percent had switched from (Intuit's) QuickBooks. We had thought a larger percentage would come from companies that were going from an analog solution (pen and paper) to digital. What this will do is raise the awareness of small businesses to this potential.

Have Small Business Accounting sales met expectations?
Raikes: Yes, they have, and we're excited about the product. We're in this for the long haul. We didn't expect to take a significant portion of the market overnight. We're taking the early momentum and building on it.

How does the work with the accounting software tie in to Office Live, which Microsoft has described as a collection of free services aimed at small businesses?
Raikes: We're using Office Live as a way to help small businesses get on the Internet. We provide domain names, hosted e-mail and a hosted Web site as a free offering. More than 70,000 people already signed up for our beta. You can imagine all kinds of scenarios. A small business could use Office Live to share accounting data with their accounting professionals. We do see these as part of an integrated whole.

Do you think you will be able to handle all of the 70,000 companies that have asked to be part of the beta, or will it be staggered?
Raikes: I'm pretty optimistic we'll be able to accommodate all 70,000 right away or close to it. We said we'd have a beta in the first quarter, and we're on track.

What do you think are the chances that Microsoft will face, within a year, a big-name competitor with an online, ad-supported productivity suite?
Raikes: I certainly think that's possible. The rumblings from the Google-Sun Microsystems (announcement last year) were about that, but disappointed the marketplace. At least that's our take. People expected something more.

We said we'd have a beta in the first quarter, and we're on track.

There's all this horsepower in your computer and at people's fingertips, and you want to take advantage of that. What appeals to people is how you can take advantage of the horsepower at your fingertips and what's online. That's why we call it "software plus service." The important opportunity is to use these in conjunction. That's exactly what we're doing with Office Live. Competitors are a little more oriented to software versus service.

Is Office Live limited to small businesses?
Raikes: Office Live is our brand name for how a customer enhances its experience office tools online, whether you are an individual info worker, small business, corporation or school.

While our initial offerings are in the small business segment, our vision, our aspiration, is across all segments. In some respects, you can see us doing this today: There's what partners are doing with SharePoint and Exchange hosted; there's managed services; there's FrontBridge, which is an Exchange service. Those are the kinds of things that indicate our broader vision today, but there's lots of opportunities ahead.