Microsoft Corporation (NASDAQ: MSFT) has two main cash cows at this moment: Windows and Office. Together, those two pieces of software (in all their iterations and versions) bring in the lion's share of revenue to the software maker. We're talking about tens of billions per fiscal year. Looking around the globe, there are free alternatives to both of those software franchises, though, which makes one think: why doesn't everyone use the freebies and stop paying for Microsoft's two big products?
The answer is bit complicated, so we'll attack the "Windows" question first. Microsoft licenses out the Windows operating system to almost all computer makers who then install it on the PCs they sell to the public and businesses (and everyone else). No customer probably told Dell Inc. (NASDAQ: DELL) or Hewlett-Packard Company (NYSE: HPQ) that they wanted Windows -- there simply is no choice when buying a PC. Recent advances by Dell to make the free Ubuntu Linux operating system available on some PCs has happened, sure. But, the majority of the public just wants what they are used to, which is Windows. People love change, right? Wrong. There are then many (many) versions of Windows for servers and workstations that are sold as well.
Let's turn to Microsoft Office. Again, it brings in a ton of revenue to Redmond, even though there are full office productivity suites that compete with it. My guess is that many of you can't name one though -- and that is what Microsoft counts on, which is branding power. The full-featured OpenOffice productivity suite is pretty darn impressive (I've used it), and it's completely free and interoperable with Microsoft Office (not sure about Office 2007). Why don't more people use it then? Lack of knowing it exists is a possibility, and having to download the suite or order it for about $10 on CD may be obstacles. Plus, you can't find it on Best Buy shelves. If customers start becoming smarter and find out out about OpenOffice or even Google Inc. (NASDAQ: GOOG)'s Google Apps, could a large piece of Microsoft's kingdom come crashing down?
[Disclosure: I own MSFT shares as of 5-29-07]
Microsoft Office or OpenOffice?
Posted May 29th 2007 5:42PM by Brian White
Filed under: Competitive strategy, Microsoft (MSFT)
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Reader Comments (Page 1 of 1)
5-29-2007 @ 9:23PM
mgnyc11 said...
While OSS (Open Source) alternatives are a threat to MSFT, I think MS has two other major obstacles that will eat into future revenues.
1. Virtualization -VMware is eating into a core area of MSFT by making the OS obsolete. WIth virtualization, you can install any OS on any server and not worry about drivers, 3rd party app, etc...This will make setting up a server as easy as downloading an MP3 from iTunes. Companies like IBM and Oracle can create a virtual machine and distribute it to customers, cutting out MS from the equation.
2. Databases - Open Source is eating into MSFT revenues. Even if a company doesn't use MySQL, they may use an Oracle or IBM Database on Linux, cutting into MSFT profits.
MSFT knows that in 10 years or less the operating system will be fairly obsolete on a server. Just like we Alt+Tab through applications, soon you will be able to do this between an OS, and with web apps, people won't care what OS they are using. Being that complex consumer apps are moving to the web (i.e. Office, image editing), people will want free or easy to use OS, and so Linux and Apple have a definite advantage long term. IMO, MSFT is not going anywhere, but it will no longer be the 300 pound gorilla on the IT sector it once was.
5-31-2007 @ 8:41AM
Tamerlane said...
Linux is a weak copy of Windows is a weak copy of Mac. There is simply no compelling reason to switch. For most people, the OS is already 'free'; it came with their pc. For those that know better, any OS is 'free'. Why are people switching to Mac, because there are some unique features there. On the Linux side, there is nothing to draw me in, only applications that look and feel like cheap copies. I know what you're going to say: look at Beryl, wobbly windows and Apache. I have no need for either. And wobbly windows, that's a total joke, and goes straight to the heart of this problem. Just because the graphics card can pull this off doesn't mena you should do it, it has no use, throw it out. By emulating most of the look and feel of Windows (or Mac, and I'm talking about OO.o as well) but not offering anyhting new or better, how can they expect people to switch in droves? For God's sake, you have anenormous development force working for free, no deadlines or constraints or business politics, the chance to start comething completely new, and you can't do anything better than a Windows clone? Throw out the old paradigms, no folders, no files, no apps, but something completely different that will change the way people interact with a computer. Sure 99 out of a hundred attemts will fail; so what, as long as one beautiful idea comes to fruition. Until it does, I don't expect Linux to go anywhere beyond the (bargement) basement.
5-31-2007 @ 4:52PM
Finalzone said...
Reply to Tamerlane
>> Linux is a weak copy of Windows is a weak copy of Mac.
Linux is not a copy of Windows if you talk about a kernel. You should really specify which distribution you are referring. Each Linux distributions is different although they share the same core. Neither Windows nor Mac provide the ability to switch to different desktop environment for example.
>> For most people, the OS is already 'free'; it came with their pc. For those that know better, any OS is 'free'.
No it is not free as you have to pay Microsoft tax and free to upgrade for Apple system. Very few company allow user to get a naked PC or Apple.
>> On the Linux side, there is nothing to draw me in, only applications that look and feel like cheap copies.
Again, what distribution did you use?
>> For God's sake, you have anenormous development force working for free, no deadlines or constraints or business politics, the chance to start comething completely new, and you can't do anything better than a Windows clone?
A Linux distribution is not a Windows clone. AFAIK, you cannot get the source to clone Windows while you can do it with a Linux distribution like Red Hat creating a large ecosystem.
>> Throw out the old paradigms, no folders, no files, no apps, but something completely different that will change the way people interact with a computer. Sure 99 out of a hundred attemts will fail; so what, as long as one beautiful idea comes to fruition. Until it does, I don't expect Linux to go anywhere beyond the (bargement) basement.
Ever heard about One Laptop Per Child porject?
8-06-2007 @ 9:00AM
Nay Jaylor said...
OpenOffice has some pretty serious usability issues and fundemental flaws (most notably the inability to search across paragraphs and the broken regexp search facility), which seem unlikely to ever be fixed considering that some of them have been known about since 2001. At present I would rather use a 10-year old copy of Word 97 since it has greater functionality for anyone above the level of basic user.