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Originally published June 14, 2010 at 10:01 PM | Page modified June 15, 2010 at 1:17 PM

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Microsoft, others realize consumer now rules tech market

The consumerization of technology has forced Microsoft to do what was previously unthinkable for its $19 billion Office empire — offer it free as a Web app.

Seattle Times technology reporter

Years ago, business technology was driven by corporations that needed Excel spreadsheets to crunch sales numbers. Now it's also driven by consumers who want to find the nearest happy hour on an iPhone.

As Microsoft starts pitching a new version of its Office software to consumers Tuesday, that consumer is riding a power trip in the tech world, driving workplace use of social networks such as Facebook and Twitter, devices such as the iPad and iPhone, and free Web apps such as Google Docs.

This consumerization of technology has forced Microsoft to do what previously was unthinkable for its $19 billion Office empire — offer it free.

Along with the paid version of Office 2010, Microsoft has launched Office Web Apps, a free Web-based version of Word, Excel, PowerPoint and OneNote with fewer features.

"We expect Office to be the biggest consumer release ever," said Takeshi Numoto, corporate vice president for Office product management.

The company hopes consumers, who have driven sales of Windows 7 since it came out last year, will do the same for Office.

"We have a reinvigorated focus on reaching out to end users," Numoto said.

David Smith, an analyst at research firm Gartner in Stamford, Conn., said the consumerization of technology and its effect on Microsoft are unstoppable.

"It's a relentless march of the launch of things in the consumer marketplace that are good and filling needs for business people in one way or the other," Smith said. "When you look at the Office suite and these kinds of things, it's a classic example of where you see it happening."

While Office continues to dominate the industry with what Microsoft estimates is more than 500 million users, the consumer challenge for the company goes beyond the Office division to the entire company.

Microsoft does have a strong connection to gamers with the Xbox video-game console and its online Xbox Live network, but other divisions have been forced to adapt to the consumer.

The popularity of Apple's iPhones among consumers who use them for work, for instance, has forced information-technology departments to support them. Microsoft has responded with plans for an iPhone competitor, the Windows Phone 7, slated to come out over the Christmas holidays.

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Meanwhile, Apple says it has sold 2 million iPad tablet devices since the iPad came out in April. While Microsoft has offered tablet software for years, it is scrambling to get new ones to market.

Google's consumer success has prompted the search-engine company to develop computer operating systems, Chrome and Android, both competitors to Microsoft's flagship Windows. Microsoft, in turn, launched Bing, a new search engine to compete with Google.

Business-software companies such as Salesforce.com are jumping on social-media technology and building corporate social networks such as Chatter. "Why can't enterprise software be more like Facebook?" is a frequent refrain from Salesforce Chief Executive Marc Benioff. Microsoft has added social-networking features to SharePoint 2010, its collaboration software.

The once-lowly individual consumer has cast a giant shadow over Microsoft in more symbolic ways as well. A watershed moment came at the end of May, when Apple, a largely consumer-tech company, passed Microsoft to become the world's most valuable technology company based on market capitalization.

Wall Street appears to care more about the spending habits of hipsters than the IT budgets of Fortune 500 companies.

The change is generational. Millennial workers were raised on technology that baby boomers had to learn. Viji Murali, chief information officer at Washington State University, calls it the digital natives vs. the digital immigrants.

Digital natives, she says, are "consumers. They know what they want. The expectation is the institution is going to support them."

"If you look at those of us in [our] 50s, we did not grow up with technology," she said. "We grew up with calculators, some of us older with slide rules.

"Every time a new technology comes out, it's a major change to us. We have to pick up a manual to figure out how to use it. The digital natives don't need a manual. They intuitively know what to do with the technology when presented to them."

Digital natives entering the workplace are forming a new "me generation" with ideas about what technology to use.

"Personally from my observation, there is an increased trend around entitlement," said Christi Liebe, corporate vice president of information technology at Bellevue's Coinstar. "This is so integrated into people's lives of a certain generation. ... We have some issues with them thinking they're IT experts because they've used Facebook."

What consumers do not necessarily understand is the importance of security and privacy issues in a corporate setting, she said. More traditional business-oriented software and devices place a high value on protecting corporate information.

Some mobile phones, for instance, may not be designed for remote shutdown and data deletion if they are lost are stolen.

Still, Coinstar has started to allow workers to use iPhones for work, as long as they're password protected.

"About a year ago, we had a policy where we didn't support iPhones," Liebe said. Then she started seeing people on her own team with iPhones.

"I said we've got to pull some data on how many actually have them. It was a lot. I realized we can't fight city hall anymore; we need to get on board," she said.

The same change happened at City Hall in Seattle when Mayor Mike McGinn took office and wanted his team to use iPhones instead of the city's BlackBerry devices. The IT department now is running an iPhone pilot with the mayor's office.

"It's taught us that we can manage these different devices," said Bill Schrier, the city's chief technology officer.

But issues remain. "I've got the home phone and cellphone for the chief of police on my [mobile] device," Schrier said. "Because my device is a city device, my staff can wipe it remotely" if it's lost or stolen.

Even Microsoft is dealing with an iPhone infection. Last year, Chief Executive Steve Ballmer saw an iPhone during a company meeting and jokingly pretended to stompit into smithereens.

Microsoft hopes Windows Phone 7 will reverse the trend. The company is also wooing consumers with new Office Web Apps, the Bing search engine and Kinect, the new Xbox motion sensor announced earlier this week.

At Coinstar, Liebe says she's now testing the iPad for corporate use.

Sharon Pian Chan: 206-464-2958 or schan@seattletimes.com

Office 2010 pricing
Microsoft will offer a free version of Office 2010, Office Web Apps, which will have fewer features than the full software. Full versions can be purchased either as a boxed copy or as a key-card number that unlocks a downloadable or preinstalled version.
Software Boxed Key card
Office Web Apps * Free with 25 gigabytes of storage
Office Home and Student $149 $119
Office Home and Business $279 $199
Office Professional $499 $349
Office Professional Academic $99 not

available

through key card

* http://office.live.com for download

Source: Microsoft

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