What Microsoft Didn’t announce…

There has been lot of talk about what Microsoft has announced about its upcoming Online Office announcement. I just wanted to talk briefly about what Microsoft didn’t announce about its cloud Office.

We respect Microsoft and as we often say, for Microsoft, doing an online version of their Office suite is…

  • NOT a technology challenge
  • IS an economic challenge
What Microsoft announced yesterday was the technology part, which is easy for them. What they didn’t announce is actually more important in this particular case, which is the business model and how they are going to make money from this without cannibalizing their existing revenue from their office suite. After all, that part of business has 85% operating profit and as Larry Ellison recently pointed out, SaaS is a low margin business.

What I am waiting to hear is how the online version of Office will be priced and whether it mandates the purchase of an Office suite to use the online version etc. I guess there are many questions than answers at this point. As Nick Carr puts it

The outcome will be determined not only by whether Microsoft will be able to maintain its dominance of the Office market but also by whether it can maintain the outsized revenues and profits it has long enjoyed in that market.

A better way to explain this is obviously with a toon…

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