CNET también está disponible en español.

Ir a español

Don't show this again

Commentary: For businesses, an Office dilemma

The selection of the next office suite--Microsoft's or an alternative--is one of the most critical decisions that IT will face in the next two years.

Commentary: For businesses, an Office dilemma
By Forrester Research
Special to CNET News.com
May 29, 2003, 2:30PM PT

By Ken Smiley, Director

Organizations that have chosen to remain on Microsoft's Office 97 are rapidly approaching the end of support for it. Faced with upgrade decisions and a new licensing program from Microsoft, the decisions these organizations make will have consequences beyond the immediate selection of what their next office suite will be.

All organizations at some point in the next two years will also be faced with a decision regarding whether Microsoft's Office suite will become a part of their standard business processes or remain simply a productivity suite. This choice will amount to the difference between Microsoft's Standard version of Office or its forthcoming Professional and Enterprise versions that will include not only additional programs but, for the first time, additional capabilities.

The cost difference between the Standard and Professional/Enterprise versions is significant; the potential benefits may also be significant if the organization is planning to use Extensible Markup Language (XML) and make use of Office as the portal to Web services. Whatever route is chosen, the consequences will have a lasting effect--meaning that the selection of the next office suite will be one of the most critical decisions, if not the most critical decision, IT will face in the next two years.

Office 97 support is expiring in January 2004, and organizations are undergoing review of migration plans. For those organizations that have held out as long as possible in upgrading their office productivity suite from Office 97 to something else, a new selection has emerged. Microsoft's announcement of the upcoming Office 2003 stock-keeping units (SKUs) has given customers another option to pursue and foreshadows decisions yet to be made by Office 2000/XP customers.

Microsoft is fundamentally changing the nature of Office SKUs. Previously, Office was offered in Standard and Professional versions, with the difference being the inclusion of Microsoft Access. It was possible to create a value for Access and determine whether the Professional version of Office made sense for a business. The SKU lineup for Office 2003 has changed significantly, expanding to six versions. And for the first time, Microsoft is differentiating them based on functions as well as additional applications.


News Analysis

A decision to cut retail prices for
some versions of the software is
more a reaction to internal pressures
than to outside competition.


Meanwhile, cost-cutting measures are increasing the demand for a basic office productivity suite. Cost cutting by IT organizations and hardware manufacturers alike has created a need for a basic office productivity suite. In this environment, competitors to Microsoft's Office, such as Sun Microsystems' StarOffice and Corel's WordPerfect Office, have been receiving more attention from IT departments and manufacturers looking to reduce their costs. For vendors, it is relatively easy to replace one office suite with another or, at a minimum, to provide a selection of suites for their customers. For IT, however, a cost-benefit analysis must be conducted before any change in suites is given approval.

Here are Office-related trends that Forrester is seeing:

• Organizations are hanging onto current suites longer, due to recent licensing changes and uncertainty about future plans. Organizations that were unwilling to commit to Software Assurance as part of Microsoft's 6.0 licensing program are faced with a difficult decision, given the changes made to the SKU lineup for Office 2003. The selection of the wrong SKU could require an organization to upgrade all or a significant part of the organization to a different SKU as needs change or as licensing is consolidated. For some Office 97 customers, this has pushed them out to delaying their decisions until this year before the support deadline, while others are on course to continue using Office 97 beyond the deadline, because a comprehensive analysis of the available product and licensing options has not yet been done.

• Replacing office suites with lower-cost alternatives in companies with low rates of use. Lower-cost office suites such as StarOffice have been getting attention because there is a belief that workers can switch in order to save on overall costs. This assumption, however, typically does not hold true unless the workers are light users with only basic needs. In some situations, a thin-client solution may also be considered as an alternative to a rich desktop office client. In either case, migration and support costs will often outweigh upfront product and licensing savings.

• The economy is forcing manufacturers to request low-cost office bundles to remain competitive. Hardware makers are attempting to do everything in their power to create low-cost PCs in order to spur consumers to buy a new systems and help bring the market out of its current slump. Hardware margins have been cut significantly, and therefore manufacturers are turning to the software on the PC and looking for places to reduce additional costs. This has spurred Microsoft to offer the new Basic edition of Office 2003 (available only to manufacturers) as a way to keep hardware makers from displacing Microsoft Office with an alternative.

• Organizations cannot justify the Professional or enhanced versions of office suites. Organizations have struggled with justifying the purchase of Office Professional, despite the relatively simple difference between existing Standard and Professional SKUs in Office XP. Microsoft Access, the only current difference, is often purchased separately as needed. As the differences between SKUs becomes more pronounced, the justification process for IT is going to become more complex, potentially on the order of several magnitudes, as functionality differences such as the inclusion of custom XML schema will have effects on business processes that will be difficult for an organization to judge. If the price differences remain the same between Standard and Professional, Professional proponents may simply reduce the argument to the fact that there is now more in Professional, and that more is better, without conducting the full cost-benefit analysis.

• Of the Microsoft Office alternatives, only StarOffice seems to be getting any attention; others are losing customers. According to Giga client surveys, those who use competing office suites are migrating to Microsoft Office almost universally. The exception to this remains StarOffice, which has been getting attention from the anti-Microsoft contingent, as well as from government and educational institutions looking for ways to save on upfront costs in purchasing an office suite. The short-term effect has been a response by Microsoft to offer more SKUs, but the long-term impact is unknown, as there has not yet been a significant migration to StarOffice.

• Organizations are still separating their buying decisions from their strategic direction. While this has been acceptable in the past, it will become increasingly more dangerous as Microsoft Office products continue to meld into new offerings. The purchase of any office suite in the next two years will have an effect on future business processes and on the way in which IT takes advantage of technologies such as XML and Web services to achieve business goals. Unless this trend changes to include office buying decisions as part of a strategic direction, organizations will be at an increasing risk of failing to capture a significant portion of the return on their investment in an office suite.

© 2003, Forrester Research, Inc. All rights reserved. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change.

Close
Drag
Autoplay: ON Autoplay: OFF