Microsoft Free Web Office -- Really Stupid or Incredibly Smart?

The news on Microsoft Office 2010 is coming hot and heavy now that the company is releasing details on the new version. And one of the big notes is that people will have access to web versions of the Office suite for free. It sounds like a counter to Google, Zoho, and others who want to end the company’s dominance. My question is whether this is a sad late-in-the-game, me-too offering from the leading office productivity apps vendor or one of the more intelligent strategic strokes that I’ve seen in a long time.

I’ll confess up front that I’m still wondering. On one hand, there is some degree of “conventional wisdom” suggesting that Google has a huge lead on the cloud front and that Microsoft is in deep trouble. Certainly Microsoft has made it possible for competitors to enter and gain strength. Add Google Mail’s gaining ability to replace Microsoft Exchange and Chrome OS around the corner, according to that company, and it leaves you wondering why Microsoft was so slow.

And then I think about how much of Microsoft’s business is in the enterprise. Just as people like to bring into a corporate setting what they use at home, they also learn habits at work. In one sense, selling products to companies has been about the biggest form of market seeding that you can find — and it’s not even discounted products, as happens when vendors offer special educational versions.

Remembering that according to Google, its number of paid users of the Apps suite is in the hundreds of thousands, it becomes clearer that hosted application suites are still in their infancy. Yes, Microsoft has allowed others to get a head start. At the same time, you could also say that Microsoft allowed others to be the pioneers and take the initial lumps. Given that it has a dominant market presence, you might reasonably conclude that if there are various choices for web apps and that one is from Microsoft, it has a much stronger chance of drawing in users if for no other reason than habit. And it does so in such a way as to preserve the presence of Exchange, because the users just want the functions and they don’t care if their employers are saving money by jumping to cheap hosted email.

Jon Fortt at Forbes had a reaction akin to mine. And his final take is also similar:

If Microsoft gets this wrong, it will cannibalize its own Office business, and investors will howl. If it gets this right, Microsoft will crush Google, Zoho, and all the other rivals who are nibbling away at Office’s dominance.
My hunch is that this is a stroke of genius from Microsoft. Why? Earlier this year when I talked to Chris Capossela, the executive who manages Office, he had clearly thought hard about how to do this right.

Capossela told me that Microsoft has studied it closely, and Office Web Applications, the free, ad-supported version of Word, Excel and PowerPoint, will probably appeal to tightwads who weren’t going to buy a copy of Office anyway. This way, rather than force those folks into Google’s arms, Microsoft can hook them into its online world and tempt them with its latest technology.

Furthermore, to really understand just how crafty this might be, look at this wording from the Microsoft press release:

“Office 2010 is the premier productivity solution across PCs, mobile phones and browsers,” said Chris Capossela, senior vice president of the Microsoft Business Division at Microsoft.

That’s shorthand for the web version being targeted at people trying to use the applications from a netbook or phone browser — devices that couldn’t run a full version of Office anyway. Microsoft held off while the conversion to web-based office applications was low, maximizing its revenues. Now that the market is changing, it’s clear that the company won’t be able to sell as many copies of Office, so it times the introduction to ultimately frustrate Google on a head start, significantly undercut potential demand, and create a cloud computing calling card for IT departments. Smart, indeed.

Image courtesy Microsoft.