Still, as I tested out the new version, I couldn't help wonder about Office's future. In its last couple of earnings reports, Microsoft has reported rare declines in revenue from sales of Office. The company blames the sluggishness on weakness in the economy—a reasonable explanation, though one that perhaps masks a larger malaise. For one thing, Office's success has bred a kind of inertia. Once you've grown used to a certain version of Word—and can do pretty much everything you need to do with it—why would you ever need the next version? I toiled away in Office 2003 until the summer of 2009. I recently switched to Office 2007, which I like very much—but I'd be lying if I said it substantially changed how I worked or that I'd be greatly hassled if I were forced to go back to 2003.
Office also faces increasing competition from cheap online alternatives like Gmail and Google Docs. To be sure, Office users aren't leaving in droves for cloud apps, but these programs do pose a long-term threat to Office's hegemony. As Web rivals get better at mimicking Office's basic functions, they will likely eat into Microsoft's share of entry-level users. There might be 500 million Office users around the world, but there are 1 billion Windows PCs. In other words, there's still an untapped market for productivity apps—and Office's future may lie in its ability to win over those folks before they flock to the Web.
One way that Microsoft hopes to attract the uninitiated is with a new free version, Office Starter Edition. This stripped-down Office freebie—no "track changes" mode in Word; no pivot tables in Excel—replaces Microsoft Works, the productivity suite that the company long marketed as a kind of gateway into Office. Starter Edition won't be sold in stores; it will only ship on new computers and will be supported entirely by a small ad that's displayed on the side of the screen. The ads don't look very annoying, though it is worth noting that Google Docs carries no advertising. Office Starter Edition, on the other hand, looks and feels pretty much like Office—meaning it's very easy to learn, and it's faster, more stable, and has a better user interface than Google Docs.
But that's not all: Microsoft is also building a collection of very good Web versions of each of the Office programs that will compete directly with Google Docs and the like. The Web apps will appeal to two audiences. First, just like Google Docs, they function as limited-featured productivity programs for folks who don't want to pay for full software. But if you do own Office, the Web apps extend your capabilities. You can create a Word doc on your full version of Office, then open, edit, and print that document anywhere else in the world—even on computers that don't have Office. Google Docs can be used this way too, but Docs sometimes has trouble displaying very complex Office documents; the Office Web apps hold out the promise of displaying Office documents exactly as you'd intended them to look.
So the next version of Office looks to be an improvement on the 2007 edition—and with the Starter Edition and great new Web apps, it could even succeed in staving off competition from free online rivals. That sounds great for Microsoft, except for one thing: In trying to win the war against free apps, Microsoft will have had to emulate them. You used to have to pay several hundred dollars for a copy of Office. Now, you don't really have to. Online and in new computers, Microsoft will give away a slate of productivity apps that, for most people, will be good enough. And thus, the question remains: Does anyone really need to buy a new version of Office anymore?
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