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Microsoft's Office streaming price too high to compete with Google Apps, some partners say

Pricing through ASPs may be four times or more what Google charges for its applications

By Eric Lai
April 30, 2008 12:00 PM ET

Computerworld - As Microsoft Corp. moves toward allowing application service providers to stream Office to their customers, the software vendor still seems to fear hurting itself more than being hurt by Google Inc.

At its Hosting Summit 2008 earlier this month in Bellevue, Wash., Microsoft officials quietly told application service providers (ASP) that they would soon be able to sell subscriptions to Office and then deliver the desktop applications to users via the Internet.

End users would access Office through application streaming, an up-and-coming technology that lets companies store applications on servers and then use the Internet or their own local networks to send the code to PCs. Corporate customers that have purchased maintenance and update contracts under Microsoft's Software Assurance program can already stream Office to internal employees. But this is the first time that Microsoft is extending the capability to ASPs, which have long campaigned for the right to do streaming.

Nevertheless, some hosting providers are unhappy about the price that Microsoft has set for streaming Office, saying it's too high to win over customers that are considering or already using less-expensive online office suites, such as Google Apps.

In addition to a free, unsupported version of Google Apps, Google offers its software in an enterprise version that includes technical support and costs $50 per end user annually. Google is still trying to build up its suite's credibility with corporate users. But early indications from ASPs are that streaming Office 2007 will cost four to six times what Google charges for its applications.

For instance, one Microsoft reseller is charging ASPs $10.20 per month for a streaming client license of Office Standard 2007, according to a price sheet seen by Computerworld. A license for Office Professional Plus 2007 costs $13.23 per user on a monthly basis through the reseller.

"I don't believe that this will attract a large number of customers currently using Google Apps," said Gagan Prakash, senior executive director of engineering at GroupSpark Inc., a Burlington, Mass.-based company that delivers hosted versions of Microsoft products through other service providers. Why does Prakash think that? Because, he said, hosting providers will need to mark up the price between 50% and 150% in order to make a profit, thereby resulting in a monthly retail price of $15 to $25 per user for Office Standard.

"In order to compete with Google, Microsoft should have a lower-end offering that is very, very competitive on pricing," Prakash said. "This [price] isn't nearly aggressive enough."

Others say the cost of the streaming option may also be too high to tempt companies that currently run on-premises versions of Office.

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