Microsoft unveils Office 2003

Millions of people use Microsoft Office to create documents, crunch numbers and communicate by e-mail -- relying on it like they would a modest sedan that transports them dependably to work each day and takes them around on their errands.

Now comes a shiny new model, loaded with extras, beckoning from behind the showroom window.

But with their old standby paid for and humming along, how many people will feel compelled to trade up?

That's the central question as the Redmond company prepares for the public debut of Microsoft Office System 2003, the latest incarnation of the software family that includes such ubiquitous titles as Microsoft Word, Excel and Outlook. Microsoft will formally launch the system, the successor to 2001's Office XP, at an event in New York City tomorrow.

Office 2003 brings a slate of new features. Word comes with such improvements as a special pane to tap into online research sites. A new junk-mail filter is among the additions to Microsoft Outlook. And new programs, such as the OneNote note-taking application, have been brought under the Office 2003 brand, although the standard suite sold at retail still consists of Word, Excel, Outlook and PowerPoint.

Throughout the new system, Microsoft has also focused on collaboration -- the ability for workers on different computers to access and work together on a single document.

The latest versions of Microsoft Office products do "a phenomenal job of enabling collaboration," said technology analyst Rob Enderle. But so far, there hasn't been large demand for those kinds of tools, which leaves a major hurdle for Microsoft to overcome as it tries to sell the new Office programs.

As in the past, Office is largely competing with its former self.

"Office XP and Office 2000 are solid products -- they didn't have significant problems. The end result is that this product as a fix for those products just won't be as compelling," Enderle said. "You have to want the collaborative capability that exists in it before you're going to get too excited about it."

Even some of those who plan to upgrade are doing it for reasons other than the promise of new features in the updated Office programs.

Brooks Sports Inc., for example, wouldn't be upgrading if it hadn't signed up for Microsoft's Software Assurance licensing program, giving it the right to move to the new software without additional charge, said Steve Cotes, senior manager of information systems at the Bothell-based running shoe and apparel company.

New customer-relationship management tools available via Microsoft Outlook 2003 and Exchange Server 2003 are intriguing, Cotes said. But for most of the company's employees, previous versions of Microsoft Office have all the features they need to complete basic tasks such as creating word-processing documents and compiling data in spreadsheets.

"We're going to be upgrading primarily because we have the right to do that, and we're looking to justify why we spent all that money (on the licensing program) a year and a half ago," Cotes said.

Others are making the upgrade more enthusiastically. Companies that have already adopted elements of the Microsoft Office System 2003 include Honeywell International, Lockheed Martin, Kinko's and Virgin Entertainment.

One appeal of the Office 2003 system is its ability to go beyond basic functions such as word processing and e-mail to solve complex business challenges, said Dan Leach, group product manager of Microsoft Office System. Examples include the new collaboration features and broader use of XML, a standardized format that lets a variety of programs, even on disparate computer systems, read and process electronic documents.

"We're certainly not going to forget where we came from -- that focus on personal productivity," Leach said. "Now, though, Office is aimed at personal productivity, and productivity of the team you work with, and productivity of your entire organization."

Analysts point out that the strategy also works in Microsoft's favor. That's because some of the extra features in the updated Office programs require that a company also run Microsoft's software for servers. Microsoft isn't as nearly as dominant in the server software market as it is in the software market for desktop PCs.

One example is information-rights management technology, which allows the creator of a file in Word or Outlook, for instance, to control who can subsequently open, copy, print, or forward that document. To use that technology, a company must also be running Microsoft Windows Server 2003.

"One way to help extend server market share is to leverage off the existing assets -- Office and Windows on the desktop," said Joe Wilcox, senior analyst at Jupiter Research.

From a financial perspective, Microsoft has a lot riding on its ability to persuade customers to adopt various elements of the new Office system.

Microsoft's information worker division, which consists essentially of its Office products, reported more than $7 billion in operating earnings on more than $9.2 billion in revenue in the company's 2003 fiscal year. That was more than 28 percent of Microsoft's total revenues for the year and more than half the company's $13.2 billion in earnings.

In terms of its contribution to Microsoft's financial success, that makes the information worker division second only to Microsoft's client division, which includes the dominant Windows operating system for desktop computers.

So successful has Microsoft Office been in achieving market share that the research firm IDC has stopped tracking Office's position and those of its competitors. By most analysts' estimates, Microsoft Office products are installed on more than 90 percent of desktop PCs in U.S. workplaces.

That doesn't mean there are no longer alternatives. With this release of Office, in fact, Microsoft faces a heightened level of competition from inexpensive and free alternatives. They include the StarOffice productivity suite from Sun Microsystems, based on the OpenOffice open-source software project.

"We don't pretend that StarOffice gives you the entirety of all the functionality of Office 2003," said John Fowler, Sun's chief technology officer for software. "We believe we have what 90 percent of people need. The really high-end financial analysts doing very complex Excel spreadsheets are not really who we're aimed at. But in fact that's a very small percentage of the population."

The StarOffice suite, which includes word processing, spreadsheet, presentation, graphics and database programs, retails for just under $80 for individual home and office users.

Estimated retail prices for Microsoft Office 2003 products are essentially the same as those charged for Office XP. The price is $399 for the standard package that comes with Word, Excel, Outlook and PowerPoint. An educational edition costs $149, and a professional edition, which comes with additional programs, costs $499. But in reality, with bulk licensing, few companies end up paying that much.

WHAT'S NEW

Microsoft Office System 2003 brings a variety of changes to venerable programs and draws new applications into the Office fold. New and updated programs include:

Word 2003: New features include the ability to save documents to shared workspaces; access online research inside Word; conduct instant-messaging conversations inside Word; and control who accesses documents and what they can do with them.

Excel 2003: Comes with enhanced statistical functions and some of the same new features that come with Word, including internal access to online research and the ability to save files to a shared workspace and collaborate with others.

Outlook 2003: A new right-side pane makes it easier to read long e-mail messages, and an improved filter "learns" to detect spam by monitoring which messages a user keeps and deletes.

PowerPoint 2003: Includes enhancements to the user interface and the ability to save presentation files to CD.

Access 2003: The new version of the database program includes greater capacity to import and export data. It also flags common database errors and gives options for fixing them.

OneNote 2003: A new note-taking application that works on desktop, laptop and Tablet PCs. Includes the ability to take notes in digital ink and to synchronize audio recordings to hear what was being said when any particular note was taken.

InfoPath 2003: Lets businesses create electronic forms, give them to employees and customers to fill out, and compile the information they contain.

Microsoft Office LiveMeeting: Lets people meet and collaborate online using computers, telephones and an Internet connection. This is an updated version of PlaceWare Conference Center, technology acquired by Microsoft earlier this year.

Source: Microsoft

P-I reporter Todd Bishop can be reached at 206-448-8221 or toddbishop@seattlepi.com

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