Microsoft deployed Bill Gates, Steve Ballmer, and a giant talking paper clip Thursday to drum up interest in Office XP, the sixth version of the company's decade-old productivity software. Though the suite delivers improved usability and integration with the Internet, IT departments may find that Microsoft's shifting licensing terms provide as compelling a reason to upgrade as XP's new features.
"People ask us, isn't Office at the pinnacle of where it can be?" Microsoft chairman Bill Gates said at a launch event in New York Thursday. "We're not anywhere close to the pinnacle."
This release of Office aims to unlock the product's functionality without requiring users to bore through multilayered menus. New "Smart Tags" icons prompt users for additional information from Internet sites when they type key words into files. A new "task pane" interface prompts users to perform common editing functions. Office XP's Excel 2002 spreadsheet and Access 2002 database applications natively read and write XML. Microsoft has banished Clippy, the "information agent" that popped up willy-nilly to offer users of previous Office versions advice, and now offers more subtle cues in XP's interface. That gave Gates an opportunity to banter with Clippy on stage in New York. Microsoft CEO Ballmer hosted a launch event in Chicago.
The question is whether Microsoft can upgrade enough of the world's 250 million Office users to provide a revenue lift in the face of slowing PC sales growth. Office and other desktop apps contributed 37% of Microsoft's $6.46 billion in third-quarter revenue. But sales of those apps rose just 7% during the quarter--about the same as PC sales.
"Folks are going to have to make some serious decisions about whether they're going to make a commitment to Microsoft or not," says Kurt Schlegel, an analyst at Meta Group. Analysts say about a third of Office users are running Office 2000, the last new release of the program two years ago. That means companies will probably skip another upgrade for a few years. "That scares Microsoft quite a bit," Schlegel says.
This fall, however, Microsoft is set to introduce changes to its corporate licensing programs that could compel IT managers to upgrade sooner, rather than later. Companies running the older Office 97 will pay about $180 per PC to upgrade to Office XP, according to research firm Gartner. But on Oct. 1, Microsoft will eliminate discounted upgrade versions of its products, and require all its business customers to buy maintenance contracts for their software, or pay full price for upgrades.
Qualifying for the maintenance program, of course, requires customers to run the most current version of an app--in this case, Office XP--by Jan. 31, 2002. IT departments can also buy time with a $250-per-seat "upgrade advantage" license that will entitle them to Office XP and subsequent versions for the next two years.