Microsoft Corp is evidently taking seriously the entry of Sun Microsystems Inc into the office applications software market with web-based hosted software acquired with Star Division GmbH earlier this week. Yesterday, Microsoft president Steve Ballmer confirmed industry gossip that it, too, would be entering that market. We certainly will be introducing web-based office productivity services he said, but refused to go into details about timescales.
Ballmer said that Microsoft had been competing with Star Office for years. But customers care about two things: functionality and compatibility. Star Office has not been good at either. As for Star Office on the internet, we will all have to wait and see. But do customers really want everything hosted? Microsoft faces a difficult juggling act if it takes too much interest in internet-hosted applications, which could end up directly competing with its core Microsoft Office applications, ridiculed for years by Sun CEO Scott McNealy as bloatware. At the same time, by accepting the validity of the concept of server-based thin client applications using the web as the primary interface, it is essentially admitting that the Windows operating system might not in the future need to be an essential component of every desktop system.
Microsoft’s trump card, however, is its installed base. Users won’t give up compatibility with the documents and spreadsheets they’ve built up over time, he said, so our strategy must be based on what we’ve already built up with Microsoft Office. It has already taken a few steps in that direction with support for thin clients using Microsoft Terminal Server and software from Citrix Systems Inc, pilot programs for application hosting of BackOffice through its Network Solutions Group (which is part of the Consumer and Commerce division), and the assembly of a team of ten or so engineers and marketers under the supervision of marketing director Jim Ewel to keep a weather eye on the Linux operating system. Meanwhile, Merrill Lynch & Co software analyst Chris Shilakes expects Microsoft to launch its applications outsourcing initiatives dubbed Complete Commerce later this year.
Faced with a threat to its core business, but unwilling to ignore for too long an area which is gaining considerable visibility, Microsoft may use a strategy it’s adopted many times before – announcing before it has a full product offering in place, in an attempt to confuse buyers and delay market decisions.
