Online rival to Microsoft Office launches

THE TIMES reported yesterday that the co-founder of the Hotmail webmail service has released a web based software clone of Microsoft Office 2007 to compete with the Vole.

Microsoft bought Hotmail for $400 million ten years ago. At the time, it probably didn't anticipate that the acquisition would help fund the design of a rival to its crown jewels, the Office suite cash cow that generates $20 billion annually, a third of Microsoft's revenue.

Sabeer Bhatia calls his web based office applications suite Live Documents. He believes it can challenge Microsoft's dominant Office suite by being significantly less expensive, with a subscription business model that allows customers to avoid the high initial cost of Office.

The software suite will be given away to individuals along with 100MB of free online data storage space. Companies can subscribe to use the software, hosted either remotely or in-house, for less than the cost of Microsoft Office. Its first customer has 6,700 employees.

Live Documents was developed over four years by just 32 software engineers at Bhatia's company InstaColl in Bangalore, India. The company is backed by SoftBank's Bodhi Fund.

Google Docs is another web based group of software as a service office applications like Live Documents. Released in February, Google's office suite already has major corporate customers, including CapGemini, General Motors and Proctor & Gamble, who see it as a lower cost alternative that handles both Volish and Open Document Format (ODF) files.

Other free, local client based alternatives to Microsoft Office are the several ODF based offerings including open sauce Open Office, Sun's StarOffice and IBM's Lotus Symphony, all compatible with Microsoft Office, though that might not continue in the future as the Vole changes its formats.

Live Documents is better than Google Docs and the other alternatives, Bhatia contends, because it closely imitates Microsoft's latest Office 2007.

He believes office applications delivered as a service over the Internet is the wave of the future, due to lower up front and later upgrade costs. He said, "This will do for documents what Hotmail did for e-mail. Why spend $400 on an upgrade when you can get it for free?"

"We are just a few years away from the end of the shrink-wrapped software business. By 2010, people will not be buying software," Bhatia said.

Mr. Bhatia might be onto something with his Live Documents office suite, delivered as a service, but we're not convinced. The overwhelming majority of users of Microsoft Office haven't yet upgraded to Office 2007, and many might not for quite a while yet. There is significant resistance among Office users to the many user interface changes Microsoft made in Office 2007, and that will limit the appeal of Live Documents as an alternative for office applications.

Then there's its dependence on Microsoft file formats, which the Vole changes regularly in order to disadvantage competitors and slowly force users through network effects to pay for expensive Office upgrades. Bhatia's potential customers can't be confident that Live Documents will keep up with Microsoft's future changes to its Office file formats, and since it doesn't support ODF files, they can't use it to migrate away from the Microsoft vendor lock-in of Office to ensure that their files will always be accessible.

Google Docs has the first mover advantage and has already attracted recognition and the respect that comes with an impressively large early customer base. It has the advantage of being compatible with both Microsoft Office and ODF file formats, too. And Google certainly has the financial resources to persevere in an extended contest with Microsoft.

We somewhat like the idea of office software as a service, but Google was there first and Live Documents is chained to the Vole, so we think it's going to have an uphill road to go.

But then, maybe Microsoft might eventually just buy Live Documents, like it did Hotmail. µ

L'INQ
The Times