Is MS Office too expensive?

I haven't posted anything about Google's new spreadsheet product yet. Mostly because I haven't had time to look at it in depth and because we all knew it was coming since at least Oct 2005 (even though Jason Calacanis seems to think calling it was a big deal) so it's no big surprise.

But I was reading Jeremy Wright's post about it this morning and I have to put in my 2 cents.

JW tries to make the argument that MS Office isn't too expensive. I think the key question to ask isn't "is MS Office too expensive" but "who wants to pay money for software"?

But let's look at Jeremy's argument in detail because I think there are several flaws in his logic.

1. MS Office is cheaper.

Jeremy starts by suggesting that Google will charge 5$/month for the whole Office suite and that Microsoft Office is cheaper because people only upgrade every five years, so $5 x 12 x 5 = $300, the price (in North American dollars perhaps) on MS Office. In Australia we pay about $500 for Office Professional Edition.

Has Google tried to charge for anything yet? In the 8 years they have been around, have they tried to charge you for anything they have produced? And yet their revenue is on track to be $10 Billion this year. I don't think they are going to change the model. The model is ad supported. So we should be comparing $300 to free. And then we have the question about why people only get new Office functionality every five years! FIVE YEARS!!! Damn, five years ago my PC was a 50 pound weakling compared to where it is today. Why shouldn't my Office suite be keeping pace with it? If I was using a free online office suite, perhaps it would get upgraded more often and I would be more productive. So I say score TWO points for the Google model on this question.

2. Office is more feature-packed.

It's true that MS Office has more features than Google's versions of them today and that's going to matter to some people. But do you really think Google aren't going to open up the API for their Office suite and let people build new functionality on top of them? I do. And anyway I don't buy the Microsoft line (that I read on Scoble's blog as well) that:

while some may argue that “most users only use 10% of Office”, the reality is that every user uses a different 10%

Let's take a quick poll - which features do YOU use most in Excel? For me it's the ability to calculate tables (basic operators like add, subtract, multiply, divide) and maybe graph it. I have NEVER used any of the fancy functions in Excel. I'm just not smart enough. And I would hazard a guess that most "home" users and most small businesses would use the same basic functions as well. This probably isn't a battle over the large corporate space today. It's a battle for the home and SME space. And the SME space is one of Microsoft's largest opportunities. Will a small business pay for something if they can get it for free? I run a small business and I say... umm no. Money not spent on software is money I can spend on... paying the mortgage. Salaries.

I went to dinner last night with an old Microsoft colleague, Duncan Strong, who now works at Webcentral, and he had an interesting insight that these are the same arguments that people made FOR mainframes and AGAINST the PC 20 years ago. And yet the light, cheap, flexible model for the PC worked. You need to ask yourself WHY. I think the same logic applies to the light, cheap, flexible model for software.

3. Microsoft provides better online support.

Yeah? Try cancelling your Hotmail Plus account. As for Google's support, the great thing about where we are at with the web at the moment is that most support queries are a Google search away. I can answer most of my support questions with a few clicks. And most of Microsoft's online support isn't provided by Microsoft. It is provided by MVPs. They don't work for MS. They are volunteers who have a passion for the product and get a little bit of lovin' from Microsoft every now and again. Most do it for the same reason many of us blog and podcast - recognition. Very easy for Google to set up a similar model.

4. Google isn’t a software company.

Sorry, WHAT? Jeremy totally lost me here. If they aren't a software company, what are they?

The other BIG factor that an online office suite has in its favour is one that I'm experiencing right now - rebuilding my PC. I hate the whole "backup my PST/OST, install Office, re-boot, download the 400 service packs / urgent security upgrades, re-boot, where did I backup my OST/PST (and what the hell is the difference between the two again?)" rollercoaster. It shouldn't take a day out of my life to re-build my PC. I can see the day rapidly approaching when I install an OS, a browser, and then get back to work. The thing I love most about Gmail is that my data is safe. I can't screw it up. I can't accidentally format a hard drive and lose it. Now... Microsoft is talking about storing all of your documents in the cloud, and that's great, but why stop there? Why not run your application in the cloud? Scoble is right of course - there are times when you aren't online and you need access to your applications, but seriously, those times are shrinking faster than the RIAA's credibility. Scoble talks about needing to open a spreadsheet on a plane and not being able to get to the web. Dude, I have a word of advice for you - DON'T. Read a book. Watch a vidcast on your iPod. It's okay. There isn't enough frakkin room in economy to open a laptop anyway. And if you're flying business class, then you probably CAN afford Microsoft Office.

And here is my final point.

We've recently seen Google announce the deal with Dell where they will be PAYING Dell to ship the Google toolbar on their PCs. For the entire history of the PC business, the economic relationship has been the other way around - the hardware guys paid the software guys to ship their software. Google has turned the model on its head.

What if... Google offered to pay BUSINESSES a share of the adsense revenue if they used Google Office? What if you got paid to use software instead of having to pay to use it?

Comments

[Miriam Parkinson]

Yes MS office IS too expensive, even when I can get student editions for a significant discount and without losing any functionality (that I've noticed anyway)
However the internet is not infallable.
What happens when the internet goes down at the exact moment that you click save on something and the entire thing is left in limbo. When the internet becomes more reliable and companies and individuals are willing to put their trust in it being available whenever we need it then MS will have some real competition. At the moment however the average consumer will not put that much trust in the internet. Its far to big and scary.

[Rob Irwin]

Back in the day, when software ruled the roost and M$ could charge what it wanted... Office was expensive, but tolerated. In today's environment, with Office clones getting better and better, and even using M$ extensions, the price is just ridiculous... but what can M$ do? It's business model is based around flogging the gear at a premium. Its solution, so far, has been to add more "features" otherwise known as "stuff you will never ever want to use and, infact, will probably grow to hate within 3 hours", which doesn't seem to be a very sensible way to combat the excellent Office clones that are emerging.

[Cameron Reilly]

a good point Miriam, I hate it when I write a blog post and it disappears during the publishing process. But there are ways around that. For example, check out Gmail. Notice how it auto-saves a draft for you every minute instead of waiting for your click SEND and risk losing everything? Surely it isn't hard for them to build similar funcitonality into their office products. In fact, it wasn't that many years ago when Microsoft Office had the exact same problem offline. You would write a word doc. Word would crash, and you would lose everything. Then they started to put auto-save into the product, and I'm pretty sure this was only around Office 2000.

[Miriam Parkinson]

This is true but the essential problem will be getting individuals to trust net based word processors etc as much as they trust MS Word etc
Its hard enough getting people to grasp the concept of podcasts and blogs let alone relying on the net for every-day office applications.
That said, the second google have excel, word and powerpoint equivalents AND I can sync it to my PDA I'm there (assuming I can import MS documents) The PDA problem is the only reason why I'm still using outlook rather than google calender. Great idea but not enough functionality yet.

[leisa.reichelt]

i recently had to decide whether i was willing to front up the $$s to buy MS Office, and I opted for Open Office. Totally free and I haven't looked back.
(Disclaimer: I use about the same range of excel features as you, Cam. Can't say whether it works well for power users!)

I've switched to Google for email and calendar though. And a combo of Google and Basecamp for project management, so I'm perfectly happy with the web-app solution.

[Cameron Reilly]

Miriam, you're right that changing user behaviour is always the hard part, but I know lots of people (like, for example, my dear old mum) who used to use Outlook Express for email but now use Gmail, because people like me, the tech support generation, suggested it. If they can make that leap, they can make this one. And here's how it'll happen... you'll get a phone call / email / sms / IM one day about six months from now from your friend / lover / parent / grandparent / significant other / one-night-standee who will say "Hey Miriam, you know a bit about computers 'n stuff, how can I buy Microsoft Office cheaply?"

And you'll say "Hey you crazy person, why buy Microsoft Office when you can get something almost as good for free?" and you'll point them to Google Office, knowing full well that you'll get ten times less support calls from them in the future.

[Miriam Parkinson]

The only way to reduce support calls from my mother is to ban her from technology altogether. She once spent 15min on the phone to an apple help center trying to get onto the internet until I pointed out that she had put the power cord from the cordless phone into her computer instead of the phone line. I dont get support calls regarding MS word because she's still using word 5.1 for mac and she doenst have ADSL because its too confusing. Other than that it all sounds good...

Ive been playing around with googles excel equivalent and I'll be looking forward to new updates and features. Its definately one to keep an eye on but I'll have to stick to MS for the moment.

[Rob Irwin]

Well the stuff I'm suggesting isn't neccessarily Net based at all. No sir, you can get this stuff up and running as its own app on your desktop and it's, essentially, no different to M$ Office in that respect. It's a concept everyone gets.

[Jeremy Wright]

Rob: On your first comment, when Office first came out, it was 1/10 the cost of competing products. People seem to have forgotten that Microsoft is one of the companies who have driven software prices *down* over the years.

Cam, I'll have a response to this later today. Suffice to say you aren't actually responding to what I said, just to what you think I said ;-)

[Jeremy Wright]

Also, Cam, on your last point... Paying manufacturers for software has been standard for nearly a decade. How do you think AOL got onto computers as a default install? Or MSN Explorer? Always paid placement. Google was following in this case, not leading.

[scientaestubique]

You're missing the point Jeremy.

The price hasn't gone down when you no longer own the software. When Vista is released, Vista & Office will cost more than the hardware they sit on. Microsoft needs to evolve their business model.

I don't use support, so that is of no value to me. It's also of little value to "the masses" as most of them find Microsoft support about as helpful as a poke in the eye, which is also as useful as many of "the masses" find the feature bloat of Office, and the clustering of products, preventing individual sale. The formats are locked down, so many people can't even open them without purchasing software.

Google may be paying for placement (old hat), but sharing revenue with hardware retailers is a stroke of genius, especially after Microsoft has been screwing them for years. They'll go from getting screwed to getting paid!

Google is trying to "organize the world's information", that includes Office documents. This is 100% pure Google Strategy. Microsoft is only a small piece of their global information pie, Google has much bigger plans.

[Jeremy Wright]

Cam: Responded here: http://www.ensight.org/archives/2006/06/08/a-note-to-all-google-illusionists/.

Scienta: Sorry, but until I see scientific proof, or trend proof, that "most" users find Microsoft support unhelpful and that "the masses" find feature bloat in Office and that retailers will actually make money from the Google trick, this is all just smoke and mirrors.

And until Google actually makes money with a *single* product outside of search/adwords/adsense, I refuse to believe they are able to build a mainstream product or service.

But then I've been asking for proof of Google's perfection for 5 years and haven't yet had anyone show me. Feel free to change that though.

Either show me a declining share of Office share *or* usage or show me a single Google product with more than 100M users *or* making more than 1B$. Until then, this is all simply magic with no real substance.

And magic from a 10B$ company is just childish. It's like the uncle at the birthday party who makes balloon animals and thinks he's cool. He should have grown out of it by now.

[Rajiv Vyas]

Good point. I agree that 90% of us use less than 10% of the functionality. Most of my word processing is done using Abi Word on Linux. I save files as RTF and have never had the problem of other person not able to open it. For SS, I use Gnumeric. Now, if I can get those functionality on the Web, why bother having a desktop based OS dependent application?

The other thing is, I smell a strong possibility that Google will try and port most of the functionality of OO. Remember the tie up between Sun and Google. Think about what would happen if I could easily upload some of the most complex OO spreadsheet to Google Spreadsheet and then download them as well. All of a sudden, OO and Google get popular with at least 20% of the users and Excel becomes redundant. In my opinion, MS Word is already redundant.

Rajiv

[Aaron]

When I loaded up Spreadsheet yesterday in IE6 and had nothing but a black screen, that was strike 1. I opened Spreadsheet in Firefox. When I loaded up a basic spreadsheet and lost formatting, that was strike 2. When I loaded up an advanced spreadsheet, with charts and graphs and it lost my formatting, and my charts that was strike 3. When I realized that outside of basic functions, there was nothing of any gravitas there that was strike 4.... ummm. yeah. 4 strikes to an out? Anyways... Google is a sinking ship at this time.

[Cameron Reilly]

yeah Aaron I wouldn't be trying to do anything advanced with it, I don't think that's it's purpose. And Google seems to be doing fine.

[Duncan Strong]

Nobody is going to be "killing" anybody in this space anytime soon. Calm down. :)

Just as Microsoft's rise to power (on the back of the PC wave, which was led by users' cries for faster deployment and more flexibility) did not put IBM out of business, Google's rise to power (to-date on the back of Gen Y's preference for online media versus traditional media) will not put Microsoft out of business.

As Bill Gates has said "when I was born, there was IBM. When I die, there will be IBM." (see http://jeffsutherland.com/2002/12/microsoft-vs-ibm-in-software-still.html)

For Gen Y (guess what folks - there is no money in selling stuff to Gen X so get over it) - it is the same refrain, replacing IBM with Microsoft.

Google and Microsoft will co-exist for years to come, and we'll all be the richer for it.

The big question for me is: can Google's dependence on Adwords/Adsense, which mirrors Microsoft's early 1980s dependence on the IBM DOS deal, underwrite a series of new franchises (as Microsoft did by extending DOS into the GUI era through Windows, and moving up the stack with Office?)

And if so, is directly challenging someone like Microsoft the way to go about it? Microsoft had some scary moments in the early 90s as they went about directly challenging IBM via the OS/2-Windows war in order to consolidate their grip on the PC platform.

All up, I'd rather be a shareholder of Google, not Microsoft, over the next 5 years. Way more headroom and hunger.

However, as I've blown all my savings on relocating to QLD, I hold neither :)