Why upgrade to Office XP?
Jeff Raikes, VP, Microsoft
The Redmond, Wash.-based software maker unveiled Office XP, the latest version of its business software, during a New York event hosted by Microsoft Chairman Bill Gates. Executives from Amazon.com, Ford Motor and other big businesses joined Gates to explain why their companies are moving to Office XP.
Despite those endorsements, Microsoft may find Office XP to be a tough sell, said Gartner analyst Michael Silver.
"Many companies just aren't that interested in Office XP," he said. "I'm hearing from a lot of people (using) Office 97--they're not going to XP because they don't see the need. Those that do see (the) benefit say they need more time to see how that's going to work for them."
While Office XP is important to Microsoft--Office products generate some 40 percent of the company's revenue--it is just one of three major releases this year. Also on tap are Xbox, Microsoft's entry into the highly competitive video game market, and Windows XP, the upgrade to its ubiquitous operating system.
Meanwhile, Microsoft is awaiting a crucial decision in its antitrust battle with the U.S. government. A federal judge has ruled that Microsoft violated antitrust laws and should be broken into two companies. A decision on Microsoft's appeal of that ruling is expected any day.
At the Office XP launch Thursday, Gates' pitch focused on how Office XP unlocks hidden knowledge and can transform personal productivity. Businesses create 740,000 terabytes of data a year--roughly equivalent to 7 billion copies of Webster's dictionary--and the challenge is to turn that information into knowledge, according to Microsoft.
Gartner analyst Michael Silver says Office XP represents a solid, incremental upgrade, but many enterprises are having a hard time justifying it in terms of cost.
The partners assisting Microsoft with the launch told how they have benefited from switching to advance copies of Office XP. Many of the testimonials focused on Extensible Markup Language (XML), a way of formatting complex documents for delivery over the Web.
Ford's chief information officer, Marv Adams, explained how the company uses Office to connect and communicate with suppliers, automatically updating invoices, work orders and the like. "They like the synchronicity with Ford and how easy it is to implement," he said. "There hasn't been a customized IT project to pull this off."
Jeffrey Woodruff, senior vice president of Internet products at Bridge Information Systems, also liked the off-the-shelf usefulness of the software. "The one thing missing in our grand scheme was an end-user application," he said. "Rather than develop our own, we brought it into a known platform--Office."
With Office XP, Bridge can, for example, let a subscriber enter a company name in a Word document, and Word will get real-time data from the Web.
Lexis-Nexis and UPS, meanwhile, are making use of a specific XML technology Microsoft calls Smart Tags. Those XML components can be used to pull down information for formatting, inserting data or checking information, such as a spelling correction made by Word 2002. Smart Tags can also be used to access external information, such as stock quotes, from within an Excel 2002 spreadsheet.
Lexis-Nexis uses Smart Tags to provide access to more than 15,000 information sources from within Office XP. UPS depends on the feature to allow customers to track packages and monitor shipping costs.
Turner Broadcasting, by contrast, uses Office XP's SharePoint Team Services for employee collaboration. The feature lets companies create Web sites for sharing calendars, contacts and documents using a browser.
To promote the feature, starting Thursday, Microsoft's bCentral small-business Web site will offer Office XP users a free 60-day SharePoint Team Services trial.
But not all the features are winning rave reviews. In a controversial move, Microsoft chose to deal with virus-infected attachments by blocking them. Outlook 2002 will reject more than 30 file types as e-mail attachments, including executable (.exe) program files. Microsoft will later issue instructions for disabling this blocking feature.
Microsoft also hasn't done away with "Clippy," the widely maligned electronic Office assistant. While the company used Clippy's retirement as part of a $30 million Office XP promotion, he is easily installed with the new package--if a person chooses to do so.
But Office XP is by far the most important, say analysts, as it is Microsoft's cash cow, accounting for 37 percent of revenue in the most recent quarter and 47 percent in fiscal 2000.
Still, customers may not line up to buy the new version, analysts warn. "There is no easy, compelling core value in upgrading to Office XP," said Forrester Research analyst Frank Gillett. "Microsoft is fiddling with the deck chairs, but the ship runs nicely, thank you."
Not every customer at the product launch was upbeat. "We're not in a big rush," said an Office customer who works for a financial services firm and didn't want to be identified. He said his company will stick with using Office 95 and Office 97.
To rally support for Office XP, Microsoft is blanketing the world with 100 launch events, including the Gates gathering in New York, another with CEO Steve Ballmer in Chicago, and sessions with other executives in Washington, D.C., and London, among other cities.
"We have 130,000 customers signed up for the launch events," Gurry said. "By contrast, 45,000 people attended the Windows 95 launch, and that was considered a really big event."
Still, Gillett and Gartner's Silver see large businesses waiting as long as possible on Office XP, even though, by Microsoft's estimation, 60 percent of companies use the two oldest versions, 95 and 97.
"We're hearing a lot of organizations are going to stay put with the version they have got," Silver said. "For many, the features they have are enough."
Microsoft's response is to add more complex features, such as Smart Tags, Silver said.
"Smart Tags can do a lot if you can figure out how to use them," he said. "If I have a feature I can use out of the box, maybe the upgrade would be more compelling. Smart Tags is like giving me a fishing rod, but I still have to figure out how to fish."
Gillett agreed. "We'd all rather go home and play with our kids than learn a new version of Office," he said.
To encourage upgrades, Microsoft made licensing changes that will compel the majority of companies to move to Office XP before Oct. 1 should they want to get the cheapest upgrade price in the future.
By looking just at the largest customers, with 1,000 users or more, Gartner estimates Microsoft will reap a windfall in Office upgrades of up to $820 million before Oct. 1, Silver said.
Staff writer Tiffany Kary contributed to this report from New York.