When Office and Windows are given away

Low prices for education market hint at Microsoft's fears

If you are looking for an Office suite, let me inform you that Open Office 2.4 rocks; it's smart, easy to use, supports open standards, is free, can be distributed freely to your friends works on virtually any computer and now you can even get free training through the QCA approved INGOTs.

Best of all, Open's engineers have done a fantastic job reverse engineering Microsoft's .doc, .xls and .ppt formats so that OO has an unparalled ability to handle a range of file formats with fidelity, including VB macros. This achievement ranks with the other great interoperability open source project, SAMBA. The SAMBA team's duplication (improvement?) of MS's SMB networking protocol liberated Mac, Linux and Windows machines from their isolation.

Are Microsoft worried? I think they must be...

If you are a student and go to your favourite online today you will find something pretty similar to this; Vista Ultimate rrp £249.00... Student price £64.95; or amazingly, Office 2007 Pro rrp £395.95... a snip at £79.94.

These are some discounts, especially if we take into account that virtually the entire cohort of 16-19 year olds and 50 per cent of the under 21s in the UK qualify. Education discounting has increased steadily over the years so let's run with this trend and see where it leads.

The trend is to zero; free, no-purchase cost, nothing; can this be a possibility?

If you're a very rich company and money is no object, heavy discounting is quite possible, maybe not sustainable on a global scale and maybe not a great way to promote your brand value either but it's the old story, market share versus profit. Can you grab/keep enough before you go bust?

Obviously, market share of the next generation of 'Office' users is everything: de Facto standards depend on near monopoly.

Imagine then Vista and Office 2007 is offered to students free (a bit like Linux and Open Office but with proprietary licensing).

Imagine also a soupcon of brand-loyalty gewgaws (aka lock-ins) such as a quirky interface (e.g. Mac Office 2008), quirkier file formats (.docx). Finally even better, one may predict that if you signed up to MS's MESH you can also expect a free laptop from an obliging ISP to run all that free software.

Is there any evidence other than the price crashes mentioned above to fuel this scenario?

In fact there are a few indicators.

For example this April, as reported in a previous post, UK Gov in partnership with Microsoft launched a Microsoft-funded £6,000,000 computer literacy drive to bring office skills to those on the other side of the digital divide. For another, Vista comes with a trial Office 2007 suite which can only save in .docx format.

As an aside .docx, (possibly one of weirdest, least interchangeable, impossible to reverse engineer format currently around) very quickly puts school ICT teachers in a spin when their students bring in their work and it won't open. Yet another indicator: one ISP already offers a free Dell Laptop with a broadband account.

Finally, the famous OLPC sub $100 notebook project has just 'joined forces' with Microsoft and now sports a Microsoft Windows XP hack. Just how much of the $100 is the cost of the OS. One suspects not very much.

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All circumstantial evidence, not enough to convict anyone, but it will do to be going on with. Here is a plausible scenario:

We are witnessing a live race - Open Office versus Free MS Office. The latest generation of phenomenally successful education-targeted sub-notebooks and diskless workstations are all running Open Office on Linux (excepting now of course the OLPC).

Within a very short time a great many young users will have been exposed to Open Office. QCA approved companies like INGOTs in the UK will supply training (if needed) and the dominance of MS Office is threatened in a critical sector; future users.

So who will win this race? Open Office and MS Office are now both free for 'bona fide' students. Which would you choose?

Well, three and more years ago this question would have been a no-brainer, you would have chosen MS Office. What about now? Is this still true?

Open Office looks set to follow in the footsteps of Firefox and achieve significant market penetration.

If, in this case, say 20 per cent are OO users, 5 per cent MS Mac Office 2004, 70 per cent MS Office 2003 and a handful were MS Office 2007/2008, then how does your student's decision look?

Both OO and MS Office 2007/8 (in our imaginary scenario are free of purchase cost to the student), the 'something expensive for nothing principle' is very strong, so free MS Office (which costs industry and the public sector hundreds of pounds per go) still is pretty compelling, especially with that free laptop!

And, after all, the young don't think too hard about the future of vendor lock in and they also always save in the application's default format (.docx). To cap it all Becta has just signed up for another three years of the now infamous MS MOU.

It looks like a win to 'free' MS Office.

Two things may be pivotal, the need for MS to protect loss of revenue and a potential backlash from a cash strapped Public Sector and bottom-line conscious business sector.

MS Office related revenue is a serious bedrock of funds for Microsoft. It can't just be given away to everyone. In the standard proprietary software business model free, or nearly free software has to be subsidised by those paying full rate. Microsoft subsidises education hardware vendors in the UK very generously already, even so their profit on turnover ratios are wafer thin.

Any loss of perceived value for bundled MS products could well further erode profits, some firms will fail. Why, for example, would a school buy a desktop computer with Vista and Office 2007 from say RM plc when a 'student' could get the whole lot pretty much for nothing and bring it in on a laptop?

Meanwhile as stated before the Public Sector and Industry are paying full price.

To the mix above add a failure of OOXML to become a Standard Format and the inability of MS Office to use already standard Open Document Formats. In which case, as in much of mainland Europe, we may see a sudden and massive, corporate and public sector switch to Open Office as firms address their bottom line and worry about backward compatibility of their legacy files.

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Many still use Office 2000, not the ideal software to add a .docx compatibility patch to. Open Office however has first class legacy file support.

Circumstantially it looks very much like MS's strategists are relying on 'just one more generation' of Office users before revenue streams from the on-line Web 2.0 world crank up. The strategy may not work for another reason though, one that MS is acutely aware judging by the resources it is committing.

Uptake even of free software has its own problems.

The Free Open Source software world has always struggled with the lack of cost of its products! Marketing 'free-stuff' as enterprise quality equivalents to 'very expensive-stuff' is not always easy as those of us in this industry know very well. It's counter intuitive and a lot of breath gets wasted explaining how FOSS even got to exist at all let alone how it became so good.

Open Office itself gets better each version, but soon I guess it too will be as glossy and as over featured as MS Office. Then how do you choose between two products other than by familiarity and personal preference? Why also would you stay with one product, unless you were locked-in by some odd format?

A strong feature of high quality Open Source Software has been adherence to open standards and the endorsement of really major companies supporting such standards. Factors like open standards have enormously helped the deployment of OSS solutions into industry. It follows that software with idiosyncratic non-standard file formats can't even be given away...

... now I understand. That's what all the fuss is about: ODF versus OOXML! No standard means no product differentiator which means dwindling market share even when you give it away. Exciting stuff.