Microsoft Links Office With Windows 7

As Microsoft prepares to launch its Office 2010 productivity software to the general public, its biggest competitor is not Google, but older versions of Microsoft Office still in use.

Most users of Office have versions that are 7 years old, having skipped the last upgrade. The largest group of users is on Office 2003, though a newer version came out in 2007, says Chris Capossela, senior vice president in Microsoft's (MSFT) information worker product management group.

With many businesses planning to replace their older PCs with newer machines running Windows 7, Microsoft sees a great opportunity to sell Office 2010 as part of the upgrade, he says.

Office 2010 boasts the latest versions of Word, Excel, PowerPoint, Outlook and more. Microsoft also is providing Web-based versions of those tools so documents can be edited and stored online, a growing area of competition vs. the likes of Google (GOOG).

Plus, Microsoft has integrated social networking services like Facebook and LinkedIn into Outlook.

Microsoft is launching Office 2010 in retail stores and online on June 15. It made the software available to corporate customers on May 12.

IBD spoke with Capossela recently about Office 2010

IBD: Google used the corporate launch of Microsoft's Office 2010 to market its Google Docs productivity suite as an alternative. What's your opinion about that?

Capossela: It underscores their lack of understanding of the enterprise. The notion that IT people want to manage multiple systems for collaboration and productivity is flawed.

The collaboration experience end users are going to have with Office 2010 and the Web applications in the browser and Office on the phone is far superior to anything out there, whether it's from Google or anybody else. And the increase in costs to do what they're suggesting and the decrease in productivity that's going to result is something that customers will see, and then they'll choose Microsoft.

The best example of that is just sharing a document. Just taking an Office document that was built in the rich client that has a piece of smart art and a watermark or a header or a footer, and then when I share that with you and you open it in the Office Web app, it looks absolutely identical to what I created. When you make edits to it and save it and I open it back up, I see exactly the edits you made and all the stuff I had in there originally. If you do that exact same thing with Google or Zoho or OpenOffice, you lose stuff. And that means loss of productivity

IBD: What types of customers will use the Office Web apps?

Capossela: The Web apps are going to be used pretty extensively.

In the business world, what we saw when we introduced the Outlook Web app 11 years ago, where we let you use Outlook in the browser, was that it expanded the number of minutes people did e-mail. So when they were at their PC they continued to use Outlook, but then when they were at their home machine or were using somebody else's machine or an Internet kiosk, the Outlook Web opened up an e-mail scenario that simply didn't exist when they were just using their rich client (PC). It really expanded doing e-mail to new scenarios that didn't exist before.

We're going to see in the enterprise space the exact same thing with Word, Excel, PowerPoint and OneNote, where the Web apps will become the way you get access to your documents when you're not at your PC. But when you are at your PC and you have the rich client installed (full Office 2010 PC software suite), the vast majority of people are going to want that responsiveness, that immediacy, that great performance that you get from the rich client.

In the consumer world, it's a totally different thing. There are lots of people who use Office every single day at home. But the Web apps will open up this freedom of getting to their documents no matter where they are. And often people want to do that from the library or from the computer lab at school. It's much more common to not be in front of your PC in the consumer world than it is in the business world.

IBD: Why did Microsoft add the social networking capabilities into Outlook?

Capossela: People are working in new ways today than they were four or five years ago.

Five years ago Facebook was a college campus phenomenon and now it's become a much, much broader phenomenon. People want to connect and collaborate through social networks, not just through (PC-based) text messages or IM.

Our job is to study how people are working and figure out ways to give them modern tools to allow them to work in ways that seem very natural for them.

We added the Outlook Social Connector. It was a relatively late thing that we did in the engineering cycle. We did it in a way that third parties could plug in connectors to their social networks. Facebook, MySpace, LinkedIn are all in there.

We want to make Outlook a universal inbox. It seemed like a natural evolution.

IBD: How many licensed Office users are there?

Capossela: We don't give an exact number. We do say we think we have roughly 500 million people who use Office on a regular basis and roughly half of it is paid for. But it's not super scientific. Our business model is very indirect, with lots of partners who sell our product.

IBD: How many people are using a version older than Office 2007?

Capossela: We've been relatively pleased with the uptake of Office 2007. But the vast majority of people are on Office 2003. There's not much (Office) '97 or 2000 left.

I certainly think we're poised to have an incredible adoption rate of Office 2010, for two reasons. One is people love the product. We had 8.6 million beta users, three times more than ever.

We're also seeing a huge interest with business users refreshing their PCs with Windows 7. A lot of people skipped (Windows) Vista and they're realizing they have an operating system (with Windows XP) that's 7 years old and it's time to upgrade. And when they upgrade their PCs, Office 2010 will be a nice addition.

By PATRICK SEITZ, INVESTOR'S BUSINESS DAILY
Posted 06:04 PM ET