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Corel targets irked Microsoft customers

The software maker hopes business customers frustrated by Microsoft's controversial new licensing programs will be ready for a change.

Scrappy software maker Corel hopes business customers frustrated by Microsoft's controversial new licensing programs will be ready for a change.

The Canadian company, whose fortunes have zigzagged in recent years after a tough fight for financial survival, is offering businesses a free one-year trial of its WordPerfect word processing application. The hope is that a percentage that try the program will decide they can live without Microsoft's full Office package and switch to ala carte software, including WordPerfect.

"It's designed to position Corel and take advantage of a great deal of frustration that has been building up in the Microsoft customer base over the enterprise licensing program," said David Roberts, vice president of enterprise solutions for Corel.

Microsoft last year announced a drastic revamping of the licensing program under which businesses pay for multiple copies of the company's software. Under the new "Software Assurance" plan that went into effect Wednesday, businesses must sign up for multi-year contracts with annual payments and guaranteed upgrades to continue receive volume discounts. Analysts have estimated the plan could increase software costs by as much as 100 percent for businesses that don't upgrade programs often.

Businesses, under increasing pressure to trim IT budgets, have balked at the changes, with surveys by independent research firms showing that a majority of businesses had not signed up for the new licensing plans by this week's deadline.

Microsoft CEO Steve Ballmer has blamed complaints on flaws in the company's marketing efforts. "I think the fact that our customers probably didn't understand our licensing as well as they might have earlier makes the transition and makes the perceived pain actually higher than perhaps the real pain," he said at a meeting with financial analysts last month.

Regardless, Corel sees an opportunity for WordPerfect, once the dominant word-processing application but now largely an afterthought. Gartner Dataquest estimates that Microsoft's Office package now accounts for more than 95 percent of the office productivity software market.

Roberts said Corel doesn't expect to rattle Office's dominance, and he was careful not to disparage Microsoft, which helped pull Corel from the financial brink two years ago with a $135 million investment, but he expects Corel can gain new customers by showing cost advantages significant enough to merit migration.

"This is not a change in strategy for Corel to go out and compete directly with Microsoft," he said, "but it is a chance to go after companies that are frustrated with certain aspects of Microsoft's enterprise licensing...Microsoft is a very important partner to us; we have to work with them for our company to be successful. But with the brand equity in WordPerfect, we felt we'd be negligent not to address this opportunity."

Paul DeGroot, an analyst for research firm Directions on Microsoft, said various surveys show that 15 to 30 percent of Microsoft business customers "are looking at lower-cost alternatives to Office as a result of changes to Microsoft's licensing."

"The fact the opportunity is there doesn't necessarily mean the business is there," DeGroot added, "but this is as good a time as any for the few remaining contenders for office suites to point out their cost advantage over Microsoft products."

A big part of Corel's argument centers on buying individual software programs rather than pre-packaged suites. Office customers have to buy a package that includes spreadsheet, database and presentation programs when all that most users need is word processing, Roberts said.

"Part of the frustration companies are feeling is that they don't need a thousand copies of PowerPoint," Microsoft's presentation program bundled with Office, he said.

Roberts acknowledged that it's become habitual for most companies to buy software in packaged suites. "This would be a massive strategy change for a company to do this, to look at componentized software where you buy what you need instead of what somebody is selling you," he said. "There's so much frustration out there, we think we can get some people to convert."

Alvin Park, an analyst for research firm Gartner, agreed that the majority of office workers require only a word processing application. With aggressive marketing and solid technical support, he expects Corel and Sun Microsystems, which is pitching its StarOffice as a low-cost alternative to Microsoft Office, could carve a few points of market share from Microsoft.

"I think this will put a little bit of pressure on Microsoft," Park said. "The differences that do exit between WordPerfect and Microsoft Word will have to be addressed, and people will have to decide how much migration pain they can handle."

The one-year trial period should go over well with Microsoft customers who are holding out on Software Assurance, Park added, since such companies have a few years to decide how to replace aging software.

"For the folks who didn't purchase Software Assurance...they can spend the next year or so doing an evaluation to see if they could move off Microsoft products," he said.