Licensing questions overshadow Office XP launch

Microsoft officially launched Office XP on Thursday morning, but observers are already questioning whether the productivity suite will get through the door of the enterprise. The answer to that question may not hinge on Office's new features and functionality, but rather on how companies approach the software giant's new licensing structure.

By Oct. 1, Microsoft intends to eliminate version upgrades, instead pushing a variety of non-perpetual licensing agreements, or limited-use contracts, which company officials say are intended to keep users running the latest software versions.

Critics, however, have called it a measure to keep Microsoft's revenue model afloat. Changes in the way Microsoft licenses the product to corporate customers are expected to cost them an additional 30 percent to 70 percent each year, according to Chris Le Tocq, principal analyst at Guernsey Research.

"When you look at the new version, it adds interesting features for people who work in a highly collaborative environment," Le Tocq said. "Overall, if collaboration is not the focus of how you work, the features are fairly incremental."

Already some customers have expressed disdain for the new program. However, the Office of the State Courts Administrator for Missouri thinks differently. It will upgrade its 3,500 users from Office 97 to Office XP later this year.

Jim Roggero, director of IT for the Missouri courts, said Microsoft's new licensing scheme did not figure into his decision to upgrade. Rather, it was the technology that won him over.

"We're not in financial negotiations with Microsoft on Office XP yet," Roggero said. "The bottom line, though, is what we see as the timetable that fits our needs. That's happening without the licensing changes."

In the product's splashy New York rollout Thursday morning, with Microsoft Chairman Bill Gates presiding, company officials promoted how the new version helps corporate users more easily access, capture, and share both local and Internet-based data, thereby "unlocking hidden knowledge" that can make an enterprise more efficient and productive.

Microsoft is arguing that this hidden knowledge is being created at a mushrooming rate, but that it is typically stored in places or held by people who have not shared it with others. Citing an example, Microsoft officials said users worldwide create 740,000TB of data each year, including 610 billion e-mail messages and documents such as reports and notes. Office XP can help users turn these huge data stores into knowledge that can be shared across an enterprise, and XML is key to linking these data stores. "We knew it was important to make [Office XP] extensible," said Gates at the rollout.

The major improvements to Office XP include new collaboration tools, voice and handwriting recognition functions, improved reliability, a fresh user interface, and a variety of functions that link Office applications to the Internet.

Also at the event, Gates underscored the importance of XML to Office XP because it is a major building block for Microsoft's .NET initiative and provides the "rich communication" that enterprises need. Microsoft intends to make full use of the tagging capabilities of XML, providing "Smart Tag" links to its own software offerings as well as those of third-party players such as UPS. "With one click, you get tracking information," Gates said of the XML link to UPS.

Another third-party player, Bridge Information Systems, a financial market data provider based in St. Louis, provided a demonstration of a real-time data feed over the Internet that is facilitated via a Smart Tag. While not its premium service, the feed would be offered to non-institutional customers such as off-trading floor users, corporations, and individual investors, said Bridge officials. The feed also could be used to create research reports on the fly.

Officials from Dearborn, Mich.-based Ford Motor Co. announced that Microsoft and Office XP are playing key roles in the "Cobra" pilot between the automaker and 12 of its suppliers. The pilot test is targeted at improving the real-time collaboration and consistency of information between buyer and supplier. Using XML-, Microsoft Outlook-, and SQL Server-based links, the suppliers involved in the trial can respond faster to Ford's warnings about its volume needs and alert Ford's materials planning system, said Ford officials.

Despite industry observers' belief that most users will creep and not march toward the new suite, Microsoft officials said they have commitments from several large or high-profile companies to upgrade up both from Office 97 and Office 2000.

Microsoft officials said many of them, including Inc. and Turner Broadcasting System Inc., are doing so because of new features, including smart tags built in by Microsoft as well as those provided by third parties, and the company's SharePoint Team Services.

"Customers are telling us they have a reason to upgrade, such as Turner for SharePoint, which enables their employees to share information quickly, and for the Smart Tags, which they think will increase productivity," said Lisa Gurry, Microsoft's product manager for Office.

Microsoft is holding more than 100 separate launch events around the world this week with 130,000 users in attendance, according to Gurry. This beats the next-best user attendance for a Microsoft launch -- that of Windows 95, where 45,000 users showed up.

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