Microsoft sets Office bundling terms

Microsoft will not include InfoPath and OneNote as part of the Office System suites sold at retail or installed on new computers, the company will disclose Wednesday.

Microsoft had left some doubt about whether these new applications would be included with Office System suites. OneNote, a note-taking program, will not be available with any of the bundles. InfoPath, a program for generating form-like documents, will come with Office 2003 Professional Enterprise Edition; Microsoft plans to make that version available only to businesses that subscribe to the company?s volume-licensing program.

Six Office System bundles will be available, including a new addition for small businesses and another to be installed on new PCs. Microsoft plans to ship Office System this summer.

"By offering different versions of Microsoft Office 2003 for different types of customers with different needs, we will be able to offer customers the latest productivity tools that fit their needs and the way they want to purchase their software," said a company representative.

Some analysts said offering InfoPath only to volume-licensing customers is an attempt by Microsoft to make Office 2003 more appealing to its most loyal customers. The move could also be intended to erase any ill will created by a controversial new licensing program.

Microsoft announced the controversial plan in May 2001. On Aug. 1, it fully enacted Licensing 6.0, where under two- or three-year "Software Assurance" contracts companies pay for discounted upgrades in advance of receiving the software. The new program, which research firm Gartner estimated would raise licensing fees between 33 percent and 107 percent, also eliminated off-the-shelf upgrades that allowed businesses to purchase the software when they wanted.

Last month, a Yankee Group and Sunbelt Software survey of 1,000 technology managers worldwide revealed that 72 percent of Microsoft customers did not sign up for Licensing 6.0. Sixty percent of those who did reported an increase in software licensing costs.

The Office System bundling plan "could be part of an effort to show customers some value around those volume-licensing agreements," said Rob Helm, an analyst with market researcher Directions on Microsoft. But he also noted that larger companies with volume-licensing agreements would be best suited to administering the product.

A Microsoft representative agreed. "Our primary scenarios target teams and organizations in the enterprise," the representative said. "Microsoft listened to customer feedback and added this to the Professional Enterprise suite sold through volume licensing, which is the primary way large and medium organizations will obtain Office."

InfoPath uses Extensible Markup Language (XML) to extract disparate data into meaningful forms. Microsoft is pitching businesses on InfoPath?s XML capabilities, which would allow a salesperson, for example, to pull notes from Word, expense data from Excel and appointment information from Outlook to generate a report.

Despite the product's potential, "it's unclear how committed Microsoft is to this app going forward," Helm said. The problem: The amount of overlap with some other core Office applications, such as Word.

Helm described limiting the bundling to larger companies as a "low-cost way of testing the waters for this app. If companies show a lot of interest, Microsoft might put more behind InfoPath."

The analyst described Microsoft's decision not to include OneNote with any of the bundles as "kind of odd. It's kind of being shunted, like Project and Visio." OneNote will be part of the Office System family, "but Microsoft seems satisfied not to offer it to 100 percent of the install base," Helm said.

OneNote is expected to appeal to consumers of portables running Microsoft's Tablet PC operating system. OneNote allows Tablet PC users to jot down notes or ideas using a stylus; the program also works with a keyboard on either a tablet or other computer.

Suite changes
In addition to InfoPath, the Enterprise edition of Office will include Access, Business Contact Manager, Excel, Outlook, PowerPoint and Publisher. Business Contact Manager is an extension of Outlook that adds customer relationship management (CRM) information to contacts, calendars and e-mail.

A similar bundle, Office 2003 Professional, will be available at retail and on new PCs, but without InfoPath. Office 2003 Standard, with Excel, Outlook, PowerPoint and Word, will be available at retail or through volume licensing.

Microsoft also will make two additions to the Office System family, one for small businesses and another as a low-cost option on new PCs. Office 2003 Small Business, Microsoft's first retail product in this category, will come with Business Contact Manager, Excel, PowerPoint, Publisher and Word. Microsoft had offered a different small business bundle with Office 2000 and XP, but that version was only available on new PCs. The product also will be sold on new PCs and through volume licensing.

Office 2003 Small Business comes as Redmond, Wash.-based Microsoft puts more emphasis on small and mid-size businesses. Last month, Microsoft moved Orlando Ayala from head of worldwide sales to chief of the company's Worldwide Small & Mid Market Solutions and Partners division.

The move took some analysts by surprise. In his new role, Ayala will be charged with creating a sales organization for distributing small and mid-size market tools from the Great Plains and Navision acquisitions. He will also be responsible for establishing footholds for new products such as Microsoft CRM.

Sapping SAP
However, Outlook running the Business Contact Manager add-on "clearly overlaps with the CRM project," Helm said. Microsoft introduced the CRM product in January, entering a multibillion-dollar industry dominated by SAP and Siebel Systems.

Still, the overlap might not matter to the software monolith. Microsoft is entering the CRM market for the first time and might be willing to tolerate some overlap to see what people want, Helm said.

The fifth bundle, also new, will add a third Office suite sold on new PCs. Office 2003 Basic--which comes with Word, Excel and Outlook--will not be sold in stores or through volume licensing.

Microsoft would not discuss pricing for consumers, businesses or PC makers, but analysts speculate that Office Basic could be a new, lower-price suite for the consumer market.

Helm described Office Basic as an attempt "to address gains Corel has made in the consumer market." In August, for example, Hewlett-Packard dumped Office for Corel WordPerfect on Pavilion consumer PCs. Dell Computer and Sony also have increased use of WordPerfect over Word in the consumer market.

The sixth version, Office Student and Teacher Edition 2003, will be available through academic volume-licensing or retail stores. In October 2001, Microsoft dropped the price of Office XP Student and Teacher Edition, which is identical to the Standard version, to $149.

But major retailers offer the product for less, typically for $129. Analysts viewed the aggressive pricing as an attempt to cut the price of the suite for the consumer market.

Office 2003 is currently in a widescale second beta test, which will be available to about a half million beta testers and businesses. About 12,000 people participated in Beta 1, which was released in October.

With Beta 2, Microsoft rebranded its flagship productivity suite as Office System, in an attempt to reposition the product as a base around which businesses build custom applications.

As part of the rebranding, Microsoft added Office to the name of the individual applications. Word 2003 is now called Office Word 2003. Office System represents the brand covering the entire family products, which includes Office 2003, InfoPath, OneNote, Publisher and Visio, among other desktop software.