Sunday, February 11, 2007

Online Office Suites - Part 1

There has been a lot of talk lately about online office suites, or Office 2.0, with the mandatory 2.0 moniker. The acquisition of Writely by Google in early March 2006 rekindled speculations that online office suites where back for good and provided a real threat to the dominant Microsoft Office position.

I believe there are some strong arguments for this, this time. If we take the new entrants in that space through a classic Clayton Christensen analysis, new online office suites clearly have new market disruptions characteristics. Compared to Microsoft Office, they provide:
  • Lower performance in "traditional attributes" but improved performance in new attributes, simplicity and convenience
  • Target non-consumption: customers who historically lacked the money or skill to buy or use the product. The standard version of Office costs about $400 where most online office suites are typically free.
  • The business model of these new entrants make money at a much lower price per unit sold.
In addition, Microsoft's monopoly on the Office suite market has created strong regulatory pressures on the company and has forced it to transform its integrated, differentiated, proprietary file format into a more modularized and standardized file format (see OpenXML), that will drive towards the commoditization of the Office suite. If a user can produce and open any Office documents with about any Office suite application, including a free one, why would someone spend $400 for MS Office 2007? These technology factors combined with the "good enough" user experience factor will create significant competitive pressure over the coming year and Google has definitely recognized the opportunity as it gears up with its Docs and Spreadsheets applications from the Writely acquisition and soon to come, a Presently offering for presentations that will presumably support the OpenXML PresentationML format.

Over the next few weeks, I will take a look at a few of those online Office suites.

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