Developers of online office productivity suites will now need to offer better prices and innovation to remain competitive, following the entrance of Microsoft with its own free Web-based Office, according to an industry analyst.
"The battle has just begun," said Michael A. Silver, vice president and research director at Gartner, pointing to Microsoft's recent move to offer its free Web-based version of its flagship productivity suite, Office Web Apps, which includes Word, PowerPoint, Excel and OneNote.
"The competition will increase as we move toward a point several years [in the future] where a majority of users can run a Web-based product for a majority of their work," Silver explained in an e-mail interview.
Microsoft Office Web Apps has the upper hand assuming it maintains the best compatibility with the full version of the product and is competitive with features, Silver said.
To compete against the software giant, he said vendors not only need to have competitive prices, but also more "interesting innovation" than what Microsoft offers.
However, the analyst noted that Google has been able to achieve some success with its subscription-based Google Apps Premier Edition, thanks in part to its free cloud-based offering Google Docs, which helped lay the path. He added that Zoho is also able to differentiate itself by targeting small and midsize businesses with a unique set of offerings.
In an e-mail interview with ZDNet Asia, a Zoho spokesperson said the company has long expected Microsoft to offer Web-based versions of the Office suite.
But he noted that Microsoft's strategy appears to focus the use of Office Web Apps primarily for viewing and minimal editing of documents, while the paid desktop version is for editing and creating documents.
"They wouldn't want their Web apps to affect their desktop Office cash-cow," said the Zoho executive. He added that Zoho continues to tout its "Beyond Office" tagline, noting that the company believes office software suites are increasingly integrated into enterprise applications such as customer relationship management.
Businesses still want security, manageability
In an e-mail interview, a Microsoft spokesperson said enterprises will likely choose to run Office Web Apps alongside the software vendor's other enterprise-class offerings. He said the Web-based Office apps are currently available in three variations:
Through Windows Live, where consumers can access the service at no cost after signing in with their Live user IDs;
Office volume licensing customers will also have access to Office Web Apps, which they have the option to deploy on-premise; and
By purchasing Microsoft's Business Productivity Online Suite, which includes Office Web Apps.
But while enterprise customers can run Office Web Apps for free via Windows Live, he noted that Microsoft believes most of its business clientele will want to deploy the apps on the vendor's SharePoint platform, particularly if they plan to provide Office Web Apps across the organization.
"We also understand that our enterprise customers will demand more management and security, and want to keep their documents and information on their network to maintain confidentiality," said the spokesperson.
Silver cautioned organizations against moving fully to Web-based online productivity suites as such offerings today are not sufficient for most users.
"A traditional suite is still needed for many users, at least occasionally, and for users that need perfect compatibility with Microsoft Office or run macros or databases, [online alternatives] may not be sufficient," the analyst said.
Migration costs and users fees also need to be taken into consideration, he added.