A Personal Blog
MS Office is *NOT* Too Expensive
I received a comment from Ian of MarkerBlog on my Google WhateverSheet post:
I am sure not going to pay Microsoft any more money
While I don’t know if Ian is saying that he simply doesn’t want to give Microsoft more money, or if he’s saying that Office is too expensive. I, however, am taking my prerogative to rant about something – even if the commenter didn’t mean what I’m going to assume he means.
My issue is with the statement “Microsoft Office is too expensive” – something I hear more and more of the closer Google gets to an “Office killer” (something I’ll address at the end).
Office Isn’t Too Expensive
The typical argument for Office being too expensive is that Google will build infrastructure which either has ads as part of the office suite, or lets people pay something on the order of 2-5$/app/month. Something “cheap” effectively, that consumers can “swallow”. I’ve heard this multiple times on “rags” from the New York Times to ZDNet to the Gilmore Gang.
Let’s be clear. Even at 5$/month for the whole suite, a Google office suite would be more expensive than MS Office. Why? Well, the “typical” person upgrades their copy of Office every 5 years (irrespective of when MS releases new versions). So 5 years x 12 months x 5$ is… 300$. And since the simplest version of Office (ie: the version Google’s likely to copy, since they are unlikely to go after Sharepoint, Commerce Server, BizTalk, etc) is only about 250$ retail if you shop around a bit.
Office is literally cheaper.
Not only that, but Office is more feature-packed. And while some may argue that “most users only use 10% of Office”, the reality is that every user uses a different 10%. So it’s not like Google can just pick the “top 10%” of features in order to kill Office. In reality, they’d need to build everything from mail merging to approval systems to macros to a VBA style extension engine to exporting to 50+ formats, etc, etc, etc.
Office is literally cheaper. Office is cheaper in value terms.
In addition, the support you get on Microsoft products (from Microsoft (did you know you get 1-3 free support calls for each version of Office you buy, free of charge?) and via their online support forums and via their team blogs and via MSDN and via the many free help sites) is way, way better than any support you’ll get from Google in the next 10 years. Hell, I can’t even find a decent amount of info on one of Google’s core API’s: GData.
Office is literally cheaper. Office is cheaper in value terms. Office is cheaper in user support.
Now, that’s not to say that Office is cheaper all around. Any online app will always save deployment costs (at the cost of infrastructure control and security), and will make maintenance easier (at the cost of a total loss of control and inability to train users effectively before rolling out new versions).
So yes, it Google office would be cheaper in some areas. But it isn’t “for the masses” (unless you define “the masses” as people who use Excel merely to do lists of items, in which case you’re not talking about Office’s main customer base anyways, you’re talking about Google office competing with small players, free players, open source players).
Why Google Won’t Do An Office Killer
Google will not do an Office killer. Partly this is because the apps don’t actually help them. Unless they can sign up 100 million people at 5$/month, this simply isn’t revenue stream that’s going to matter to them. It’s also not a revenue stream they can afford to hire support staff for.
Besides, it’s not part of their mission (organize all the world’s information). Unless you take their mission to mean “supply every app for every individual on the planet”… In which case I’d like to see them release their existing software for Linux and Mac first.
The only reasons I can see Google going in this direction are:
- to throw Microsoft off
- because their staff did it on their 20% time and they figured they might as well release it
- to see if Wall Street reacts positively (they didn’t, and they won’t, because it doesn’t matter to the bottom line… I mean, if Gmail doesn’t matter to the bottom line, does anyone think Google WhateverSheet will?)
No, Google won’t do an Office killer. What they will do is kill the open source market for these products, kill the freeware market for these products and kill the Web 2.0 market for these products. In effect, the market will become split between Office and Google office. With Office making billions and Google office getting all the press (but none of the signups).
Why Google Can’t Do an Office Killer
This is something I’ve covered before. Google isn’t a software company. They can build a great search engine (even though it loses relevance and quality every year). They can build great infrastructure (which they only put to use with the main search engine and adsense). They can build an okay mail client (which only really competes with Hotmail and Yahoo! Mail, even though neither has lost any subscribers to it, and both have 10 times the member base). They build a pretty darn good mapping service (even though Live Local is way outpacing it in features, usability and speed).
But they can’t do consumer software. In fact, anything that requires support is completely beyond their grasp. I’ve written this before. Just try and get an AdWords refund for clickfraud (look at referrers from google’s domains vs what they actually show… you’ll see discrepancies). It can take months, and never even happen because Google doesn’t trust your data, and they won’t show you theirs (look for lawsuits over AdWords this year btw).
They can’t do consumer software. They can’t do support. They have no unification. Their software is always a poor-man’s version of every competitive product. Google’s spreadsheet app? No macros, no templates, no formula builders, no help system, no tutorial, no walkthroughs, no advanced features at all.
If you can’t build the 10% of the features your customers want, can’t maintain uptime on your web-based software, can’t support customers when things go wrong and can’t export to the formats they need… Then exactly who are we expecting to use these apps?
Sorry, Google’s software is more expensive, less supported and ultimately will never kille Office with this metaphor. If they get a new metaphor who knows. Anything’s possible. But this helter skelter “maybe it all makes sense to Google”, release as beta to 1000 people then close it because you can’t handle the load, don’t update software (even if you buy it) for years at a time, never take stuff out of beta, don’t answer support emails, refuse to document API’s system Google’s got going on simply isn’t going to take it mass market.
10 million users, sure. But that’s not mass market, and 10 million users isn’t enough to even dent Google’s balance sheet. At their level they need hundreds of millions of users for every single product to make a difference and save the company from the future collapse of search.
</ rant>
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| Print article | This entry was posted by Jeremy Wright on June 6, 2006 at 7:07 pm, and is filed under IT Thoughts. Follow any responses to this post through RSS 2.0. Both comments and pings are currently closed. |
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about 5 years ago
Fantastic rant and while one could get into a discussion of the future value of the $300 you have to out lay vs the other model, I am just pleased to have the option.
about 5 years ago
Options are good :) I would, say, though, that in a subscription model, there is 0 value to you after you unsubscribe. In fact, it could be said that there’s a negative value after each month’s payment, since it would take work to detangle yourself from the service. Whereas with the 300$ you can use it for life if you want (or from 97 until now, nearly 10 years later).
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).
about 5 years ago
I agree with your thoughts in terms of Google, I believe the whole Google Office/ Microsoft slayer thing is over hyped and not based on reality, but I disagree on Office being too dear: it is to dear for the average person, and unfortunately the reality of this is that it encourages bootleg and illegal copies….give me open office any day over Microsoft Office in terms of cost, for 95% of people Open Office is the best (and cheapest) solution out there.
about 5 years ago
Okay, interesting commentary J. I guess it comes down to people don’t see the value of software. $30,000 for a car … sure. $100,000 for a house … sure. Even $15 or $20 for software, whoah hold it buddy. We ran into the problem with Qumana and I make those decisions myself. But I am getting more willing to pay for software instead of finding freeware solutions.
about 5 years ago
Dunc: So why aren’t 95% of people using it? OpenOffice hasn’t even dented Office sales yet.
about 5 years ago
Interesting discussion. I think one of the biggest reasons MS Office is so popular is because it’s the only thing people ever hear about. We have a site license for WordPerfect Office at Saginaw Valley State University where I work. All students, faculty, and staff can take it home and install it for free. A lot of the staff use WP because they were brought up on it back when it was a blue and white DOS screen, but none of the students have ever heard of it. They always know about MS Office.
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.
about 5 years ago
I disagree with you JW, on so many levels I had to write it up. :-)
about 5 years ago
Good points Nick.
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…
about 5 years ago
“Office costs too much” can be reduced to “Office costs”. People who only want to write a once-a-month letter to their electricity company are certainly paying through the nose if they insist on having Office as their tool. And frankly, so are those who do a little bit of spreadsheeting – I’d bet that a substantial majority would find that Open Office Calc successfully delivers all the features they’re likely to use.
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.
about 5 years ago
” I would, say, though, that in a subscription model, there is 0 value to you after you unsubscribe. In fact, it could be said that there’s a negative value after each month’s payment, since it would take work to detangle yourself from the service. Whereas with the 300$ you can use it for life if you want (or from 97 until now, nearly 10 years later).”
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.
about 5 years ago
Eric: Software you own you can keep using forever if you want (and yes “own”, thanks to EULA’s). When you unsubscribe from a subscription service there is 0 value left (in fact, possibly a negative value if you can’t get your data out). Saying software you own has 0 value after you buy the next version is disingenious. If you’ve used it for 5 years and felt it was worth it enough to buy a new version, great. If you’ve been happy with Office since it’s 97 version and are still using that, awesome. You’ve gotten way more value out than you would have from a subscription service.
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.