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Originally published December 4, 2006 at 12:00 AM | Page modified December 4, 2006 at 8:22 AM

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Extreme makeover (or, How a "ribbon" might keep Office on top)

A small poster hanging in a Microsoft bathroom cut to the heart of the company's goal for its latest version of Office. "Fact: People other than...

Seattle Times business reporter

A small poster hanging in a Microsoft bathroom cut to the heart of the company's goal for its latest version of Office.

"Fact: People other than Accountants may actually use Pivot Tables this time around!"

The poster, meant to introduce employees to Office 2007's features, refers to a tool for comparing data in Microsoft's spreadsheet program, Excel.

One of the biggest changes in the software, which was launched for business customers last week and will be available broadly at the end of next month, is a new interface designed to help users find more of the myriad features built in to the 15 desktop programs under the Office 2007 banner.

Called the "ribbon," it replaces the familiar drop-down menus with a wide strip of commands relevant to the task at hand.

This represents the biggest advance in the Office user interface in at least a decade, said Jeff Raikes, president of the Microsoft Business Division. The ribbon headlines an Office release that more than 2,000 Microsoft programmers worked on for three years.

At a New York launch event last week, Microsoft pitched the benefits of using Office along with Windows Vista, a new version of its flagship operating system five years in the making, and Exchange Server 2007, its e-mail platform.

Flavors of Office

By the end of January, Office will be available in eight versions.

Office Enterprise 2007: Volume licenses only

Office Professional Plus 2007: Volume licenses only

Office Ultimate 2007: $679 / $539 upgrade

Office Professional 2007: $499 / $329 upgrade

Office Small Business 2007: $449 / $279 upgrade

Office Standard 2007: $399 / $239 upgrade

Office Home and Student 2007: $149 / NA

Office Basic 2007: Available through PC makers only

Source: Microsoft

Giving more exposure to Office features and expanding the platform's scope fit Raikes' goals for his division, which contributed a third of Microsoft's sales and $9.6 billion in operating profits during the past fiscal year. The division is expected to grow between 8 and 9 percent this year.

"Office symbolizes what we think of when people want to do information work," Raikes said in a recent interview. "We want to continuously grow and expand that definition because we know that the world of information work is continuously changing."

Office 2007 is at the center of an array of offerings from the Microsoft Business Division, which Raikes said is in the midst of a transformation.

Five years ago, people thought of Office as Word, Excel, PowerPoint and maybe Outlook, he said. Now it's "the brand name" for things like collaboration, Internet phone calls, business intelligence and other functions.

Emerging competition

Microsoft's strategy of packing more into Office — and making what's there easier to find and use — puts it in stark contrast with emerging competition from Google. Among the search giant's growing number of online applications are spartan word-processing and spreadsheet programs accessible free via the Internet.

Advertisers pay to put their messages in front of users of these services, generating revenue for Google.

Google Chief Executive Eric Schmidt said last month his company intends to roll out more online products to compete with other pieces of Office, but he doesn't expect many users — particularly demanding business users — to abandon Office.

"We're not arguing that it is an Office replacement," Schmidt said at the Web 2.0 conference in San Francisco, according to Dow Jones News Service. "Our focus is on casual sharing" of data.

Most of Office's revenues come from sales to businesses that buy volume licensing agreements as opposed to small businesses and consumers that buy Office at retail. That's the market segment Google has in its crosshairs.

Only 40 percent of Office revenues come from sales of packaged software, according to an analysis of Microsoft's 2006 annual report by Michael Cusumano, a Massachusetts Institute of Technology professor who teaches a class on the company.

"They're not so easily vulnerable to these outside challenges," Cusumano said.

Wireless landscape

Not yet, anyway. But the threat from Web-based applications could grow with the proliferation of wireless Internet access, mobile devices and short-form text communications, such as instant messaging.

"The Office products, which are really big generators of cash, are highly at risk," said Mark Anderson, a Friday Harbor technology analyst. "It's not at all hard to imagine a new generation growing up with mobile devices and deciding they don't need Microsoft Word."

Raikes said the broader movement toward software delivered over the Internet as a service is a major new element in the competitive landscape for Office, eclipsing threats from open-source software that existed when the last version, Office 2003, was launched.

Today, Microsoft's leaders like to talk about "software plus services," emphasizing the role their desktop products will play in combination with functions delivered over the Internet — sometimes called services in the sky, or in the cloud, in reference to the remote warehouses of computer servers the software resides on.

Web service

Chris Capossela, corporate vice president of product management in the Business Division, said Microsoft hasn't touted much of the Web services built into Office.

"I think one of the best kept secrets about Office 2007 is the fact that we've deeply integrated Web services into the experience itself, to the point where you may not even know you're using these Office services in the sky," he said.

One example is document templates and clip art that can be downloaded into Word from Office Online, a Microsoft Web site that sees 85 million unique visitors a month. Another allows users to share their Outlook calendar online.

Microsoft has other services lining up.

It recently launched Office Live, a set of services for small businesses, including Web hosting and e-mail. Small businesses can also take advantage of a Microsoft-hosted server to share documents with outside vendors such as accountants and lawyers. The user can control who gets access to the documents.

"Office Live provides that server infrastructure — you don't know that it's a server, it's just up in the cloud somewhere — and now you can share it," Capossela said. "Put five or six documents up there, send a link to your accountant and say, 'Hey, can you take a look at this stuff.' "

Microsoft is also building an online version of its customer-relationship management software, which would compete with a leader in that area,

It has not announced definitive plans to move word-processing or spreadsheet applications online, which would compete directly with Google Docs and Spreadsheets and similar offerings from several smaller players.

Capossela said the Business Division is exploring possibilities that include moving Microsoft's bare-bones Works programs online, as well as advertising-funded models.

Competing with itself

As with other markets where Microsoft products dominate, Office 2007's biggest competition probably consists of earlier Office versions, used by nearly 500 million people.

"Some businesses skip one, two, even three upgrade levels and just keep using what they've been using," said Matt Rosoff, an analyst with Directions on Microsoft in Kirkland. "That continues to be a problem and they have to keep doing things in each new release to make Office compelling."

With Office 2007, Microsoft has to convince people and businesses that it's worth the cost to upgrade. Various packages, or suites, cost from $149 to $679 at retail. Another consideration is the time required for users to become familiar with the new interface.

That shouldn't be too big a hurdle. According to Microsoft's research, it took most people between two days and two weeks to become fully comfortable with the Office ribbon. The time invested will pay back dividends in productivity, Raikes said.

"For the most common things that people do, we've reduced the number of keystrokes by 60 percent," Raikes said. "This is about your productivity. Having you be able to get your job done faster makes you happier, it makes the people you work with happier."

Benjamin J. Romano:

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