RE: Google’s business model. Sure, advertising. In applications. Let’s be clear, outside of search and adsense on Google’s sites and other non-Google properties, how much as Google made *collectively* since they started? In their S1 filings, less than 100M$. That’s less than .1% of their income. Sure, they’re an ad company, but their ad supported products *aren’t working* for them from a financial standpoint.

To think that users are going to click on ads inside a spreadsheet app is silly. To think that users will be comfortable with contextual advertising beside their confidential data is even sillier. And to think that tens of millions of users would migrate in the next 1-2 years is daft.

RE: Barebones apps. I’ll agree. But that’s not Microsoft’s main customer base. You may feel you, and the people you know, don’t need the advanced features. And that’ll be true until you try and do something the app doesn’t do. Try and paste a Google Spreadsheets table into Writely. That’s intuitive behaviour in Office that simply won’t work as Google is currently developing their apps. Again, if people were “just writing letters”, they could use Wordpad. It’s there and it works. Or OpenOffice. StarOffice. Office+.

There have been free office apps around since the beginning of time. And users haven’t chosen them. Sometimes it’s because of file compatibility (try saving a Writely doc in Wordperfect format or RTF). Sometimes it’s because of features. Sometimes it’s because of familiiarity. But to say that users haven’t ever switched before and will now switch just because it’s free isn’t logic that I’m able to follow. At least not *this cycle*. Next cycle, maybe. But we need to train them to go online (being honest, online apps are the future, but mainstream users won’t make that jump right away).

I’ll have more opinion later today in response to Cam’s post.

Personally this line of reasoning always annoys me. Purchased software has 0 value after you buy the latest version. That copy of Office 95 I had? Worthless the day I bought Office 97. Office 97? Worthless when I got Office 2000. (Where I guess my argument ends… Office XP/2003 just don’t offer anything that makes the $300 worth it to me. But the point is that software you “own” (which, you don’t really, read Microsoft’s EULA sometime) has just as much of a shelf life as subscription software. The notion that I could re-install Office 95 20 years later (assuming computers then are backwards compatible enough to do so) doesn’t add anything to the value proposition for me.

To respond to some of the points in your post:

So far, Google’s suite isn’t $5 a month, it’s free. It’s hard to argue that free is more expensive than $300. Google’s business model is based on advertising, not selling software, so it’s unlikely they’ll ever charge to use these tools they’re building.

Secondly, the value proposition in software isn’t just the price. Microsoft Office is a complex software package – too complex for a great many users, and much more than the average user needs. Ever met someone’s grandmother who used macros and VBA extensions? Neither have I. Most home users use Word to type the occasional letter… and given the kind of support calls I’ve gotten from friends and family, MS Office is ill suited to that task precisely because it is so complex. It’s incredibly easy to crash, lose your data, etc. if you don’t know what you’re doing.

For what the typical person needs these things for (writing letters, making lists), bare bones applications like Writely and Google Spreadsheets are perfectly suited for them (and for power users, OpenOffice is on par with Office 2000). Microsoft Office’s dominance on consumer PC’s is largely thanks to marketting and piracy (borrowing a friend’s CD’s).

I wouldn’t expect enterprises to migrate to Google Spreadsheets for a laundry list of reasons, but I’d be much more likely to send the link to my grandmother than try to give her Excel – it’s functionality is adequate, it requires no install, no maintenance, you can’t crash it, and as I said, it’s free.

That’s the market Google is going for – they’re not looking to supplant Excel inside of enterprises, they’re going for casual home users and very small businesses. One thing Microsoft does *not* do well is in making consumer versions of its business software… the one point I agree with is that Google and MS Office aren’t even competing, at least not yet. Google and Microsoft are going after two entirely different markets.

Now – let’s imagine Google did want to go after the Enterprise. Google can offer significant advantages over MS Office. Browser based apps mean the data stays in a central location. Deployment and upgrades are painless. It can run on significantly older client PC’s, running alternative (free) operating systems. Support calls will drop. What’s missing is an ability to host it locally (enterprises aren’t going to host their data with a third party) and it would need significantly more features over these launch versions (including, as you note, support options). Maybe such a product is in the pipeline, and then we can legitimately compare MS Office vs. Google Office. Today though it’s apples and oranges.

It gets more complex when we factor work into the equation. Providing Office on every employee’s PC is not expensive. Not when compared to the overall cost of the employee, that is. If we assume a 4-year upgrade cycle (not unusual in my experience) that’s not a lot of productivity gain needed to recoup the investment. I’m deliberately ignoring the costs incurred by runaway unskilled spreadsheet “developers” here, btw.

Once you have a toolset at work that you are able to make use of to some degree of competency, you’re likely to want the same tools to be available to you at home. OK, if you’re a geek then you probably have imperial, metric and the four-D measurement system you designed last year, but geeks aren’t normal. Or so my wife tells me.

I do believe that Microsoft Office is too expensive, not compared to anything else. I also think most Adobe products are too expensive.

And your comments on people not knowing of Office alternatives are spot on. Most people I talk to have no concept of anything other than Microsoft office. The fact that the only Office productivity apps we have in our Mac lab is Microsoft office speaks volumes. Add to that the fact that when people ask me to borrow Office CDs from work, and I inform them that I can’t give that to them because it’s not legal, they’re shocked.

So, I don’t care for talk about Office killers myself, I just think it’s too expensive. We still have 20+ copies of Office 2000 in circulation, let alone XP, let alone 2003, let way alone Office 12. That said, I love the office suite, it’s just too expensive for me to use. I’ve been using Open Office for almost a year, and am totally impressed.

Will it change the market? I can’t see anything interesting happening there…

I think another reason so many people use Office is because they can borrow a friend’s CD and install it on their own computer. It may be illegal, but so is downloading MP3s. People like “free”.

The average user out there doesn’t need any of the fancy features brought by an office package. They simply need a basic word processer and I think web apps can provide that. Being able to access documents from any computer with an Internet connection and not having to worry about installing software are two huge advantages if you ask me.

A similar subscription model would have run such a hypothetical user 600$ (and, they probably would have switched services several times, since no online subscription service has lasted 10 years).