New Office has compelling enhancements but also big holes

Microsoft made major improvements in Office's user interface and application functionality, but the lack of an iPad version is concerning

The new version of Microsoft Office offers compelling enhancements to its capabilities and interface design, as well as improvements in cloud functionality that should make it a far better product than its predecessor.

However, gaps in support for non-Windows mobile platforms, questions about pricing and a continued reliance on locally installed software weaken the suite's potential for success and could open the door for competitors.

That's the initial assessment from various industry analysts who are following the release of the new Office version's public beta this week.

"There's a lot of value there," said Sarah Rotman Epps, a Forrester Research analyst. "It's the best version of Office ever."

So far, the consensus among many analysts and reviewers seems to be that Microsoft has done an outstanding job simplifying and improving the suite's user interface, which has been criticized in the past as cluttered and confusing, and optimizing it for tablets that use hand gestures and styluses for input.

Also getting high marks are new application features such as a "read mode" in Word that improves the reading experience, and a PDF "reflow" capability for opening and editing PDF files.

A "presenter view" in PowerPoint has also been praised because it privately shows various elements to the presenter that the audience doesn't see, including notes, upcoming slides and a clock for timing presentations. A better user experience and more powerful data analysis tools have been highlighted in Excel.

"There are a lot of new features in the applications themselves," said IDC analyst Melissa Webster. "They add up to increased user productivity."

Microsoft is also getting props for advancements in cloud functionality. While Microsoft will continue selling Office via an upfront, perpetual license -- the product branded Office 2013 -- it will also let people buy the suite as a cloud-based subscription service, which carries the existing Office 365 brand.

Today, Office 365 is a cloud-based applications suite for business users that typically includes online versions of Exchange, Lync and SharePoint, as well as Office Web Apps, all of which have a subset of the features of their on-premise counterparts.

Now, Office 365 is being offered to consumers as well, as a hosted version of the new Office applications. Although it is a cloud-based service, including online storage and upgrades delivered automatically, most of the software components need to be installed locally. Buyers will be able to install the software on up to five computers.

Other cloud enhancements include tighter integration with the company's SkyDrive cloud-storage service, which will let Office users save files online, making them accessible from multiple devices. Office will also save settings and preferences to the cloud, so they can be synchronized across a user's different computers. A feature called Office on Demand will even let users stream a full version of Office on the fly to PCs they don't own for use during specific, one-time sessions.

"The cloud is a big theme in this release. We see Microsoft's cloud strategy [for Office] evolving and taking another big step," Webster said.

However, the Office software is still installed on the user devices, unlike, for example, Google Apps, whose applications reside on Google servers and are accessed by users via a Web browser.

The conundrum for Microsoft is that there's a limit to the functionality that vendors can provide in applications that are fully hosted in the cloud. That's the case with Office Web Apps, for instance, the hosted version of Office that contains a subset of the full functionality.

"To run the full, high-octane versions of the applications, you need them installed on the user's machine," Webster said.

For example, Office 365 Home Premium -- the subscription option for families and individuals -- will still require users to install full-featured versions of the Office applications on each machine. Documents can be stored online, however, and the product comes with 20G bytes of SkyDrive storage.

Eventually, browser-based applications will reach a level of functionality that's on par with locally installed applications, said Rob Koplowitz, a Forrester Research analyst.

That future is closer in certain types of applications, like Web-based email, but further in others, like spreadsheets, he said.

"For the time being, Microsoft is leveraging the cloud in a clever way to bring the best of both worlds together," he said.

Although the beta launch was focused on the consumer market, Microsoft also addressed the SMB and enterprise markets by stressing that the upgrade effort extends to the collaboration and communication server products like Exchange, Lync, Yammer and SharePoint, and by announcing new Office 365 subscription options for workplace use.

By tying together all these different products, Microsoft is making an aggressive move to try to wipe out the many startups that have sprung up in recent years to provide point solutions for enterprise collaboration, cloud file storage, and sharing and productivity applications, Koplowitz said.

"Microsoft is following a strategy of bundling and integrating products, making them work well together really well, and pushing down competitors' products to the level of features, so it can own the knowledge worker experience from end to end," he said.

Microsoft is also stressing the point that Office is available across a variety of Windows 7 and Windows 8 devices, including desktop PCs, laptops, tablets and smartphones. It will also be available for Mac OS desktops and laptops.

However, a gaping hole in this strategy is Microsoft's silence and apparent reticence to create versions of Office for non-Windows tablets and smartphones, in particular iOS and Android devices.

Both at home and at work, people are using a variety of devices -- Windows and Mac OS desktops and laptops, iPads, iPhones, Android smartphones and so on -- and expect applications and data to be available across them.

"The big question is what's Microsoft's mobile strategy beyond Windows," Rotman Epps said. "It leaves Office open to disruption."

For example, particular threats are productivity suites that, despite lacking the comprehensive feature set of Office, work on iOS and Android devices, like Google's Quickoffice, she said.

Another area where Microsoft can improve is in simplifying the bundling and licensing of Office 365, which now encompasses many options, variables and packages for consumers, SMBs, enterprises, government agencies and schools.

In this area, Google Apps has managed to appeal to customers attracted by its simpler and more streamlined offer with fewer packages and straightforward pricing, said Guy Creese, a Gartner analyst.

"Microsoft should be using the cloud as an opportunity to simplify things and it isn't," Creese said. "It's better than it was, but not as clean as it could be."

A big, unanswered question is price. Office has historically not been cheap, and with the increasing pressure from free and inexpensive alternatives, the issue has become a critical element for consumer and workplace buyers.

"The shoe waiting to drop is how much it's going to cost," Creese said. "It's the part everyone wants to know before making a decision to purchase it or not."

The new subscription-based model, in which customers pay a monthly or annual fee instead of one up-front payment, could cut both ways.

The option to pay a smaller amount every month or every year, along with the five-device license and the automatic upgrades, could entice some buyers who have been put off by the perpetual license price.

However, depending on the monthly or annual fee, it could be a disincentive as well, especially for buyers who find the subscription payments adding up over time, Creese said.

Microsoft didn't announce a shipping date for the new Office. Windows 8 will ship in October.

Juan Carlos Perez covers enterprise communication/collaboration suites, operating systems, browsers and general technology breaking news for The IDG News Service. Follow Juan on Twitter at @JuanCPerezIDG.

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