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The Hidden Cost of Microsoft's 'Free' Online Office Suite

Last Updated Jul 27, 2009 12:25 PM EDT

Despite what you've heard, the online version of Office 2010 announced by Microsoft earlier this week won't be free to corporate users, and isn't a threat to the likes of Google, Adobe, or even Zoho, which sells online productivity software to small and medium-sized businesses.

It's true that Microsoft will offer consumers a free "lightweight" version of Office 2010 through their Windows Live (formerly Hotmail) accounts. But that largess doesn't extend to business customers, who will either have to pay a subscription fee or purchase corporate access licenses (CALs) for Office in order to be given access to the online application suite. Microsoft already does this with email â€" the infamous Outlook Web Access (or OWA, pronounced ow!-wah! because of the painful user experience).

But wait â€" there's more! A Microsoft spokesperson told me that customers will need to buy a SharePoint server, which ranges from $4,400 plus CALs or $41,000, all CALs included if they want to share documents using the online version of Office 2010.

So let's recap this notion of a free online Office suite for business:
  • You need a SharePoint server and license in order to collaborate, and either:
    • You need to pay license fees for an on-premise version of Office 2010 or
    • You need to pay an as-yet-unspecified subscription fee.
This online version of Office has a lot in common with Microsoft Works -- the word processing and spreadsheet applications Microsoft created for customers who don't want to pay a premium for Office. Works, like Office 2010 online, is a way for Microsoft to pretend to listen to its customers while thwarting their actual intent. The idea behind Works is that it performs basic wordprocessing or number-crunching functios for the 85 percent of users who don't need the more advanced features of Word and Excel, allowing enterprises to only purchase CALs for "power users." But Works isn't fully compatible with Office -- Works can open an Office file, but can't properly render formatting or business processes -- making it useless for most forms of collaboration. Likewise with Office 2010 online, you can get some of it for free, but you still have to pay a premium if you actually want to make it useful. Free online Office 2010 is like getting four free tires without the car, and having to pay full price for the car (including the cost of the tires).

In fact, the likes of P&G, Prudential, Fairchild Semiconductor are testing alternatives to Microsoft Office because they're tired of paying full price for software that the vast majority of its employees don't use to its fullest extent, and are finding that Google, Zoho and Adobe offer perfectly acceptable alternatives to Office, even for so-called power users -- at a fraction of the cost.

Speaking of which, Microsoft still hasn't said what it means by "lightweight," or provided pricing information for the subscription offer. But the shock produced by, and the timing of its announcement had us thinking that Microsoft had seen the light, turned over a new leaf, was finally accepting the idea that Web-based software is more than just another delivery mechanism -- it's a way for software vendors to engage with their customers, to exchange service and continual product improvements for fair subscription fees, and to win business by being better than the competition -- not through lock-in contracts and software written to be incompatible with competing products. But in fact all we have is Microsoft finding yet another way to trick customers, this time by subverting the idea of software-as-a-service and transforming it to service-bait-and-switch.

[Image source: EssG via Flickr]
  • Michael Hickins

    Michael Hickins has written about technology and business for BNET, InformationWeek, InternetNews.com, eWEEK -- where he was executive editor from 2007-2008 -- The Curator, Pseudo.com, Multex Investor, Reuters, and Conde Nast's WWD.com. Hickins is the author of The Actual Adventures of Michael Missing, a collection of short stories published by Alfred A. Knopf in 1991. He also published Blomqvist, a picaresque novel set in 11th century Europe, in 2006. Hickins remains passionately interested in the intersections of business, technology, politics and culture, and endures a life-long obsession with baseball. He is married with two children and lives in Manhattan.