Can Microsoft still count on inertia to spur upgrades to Office 2010?

The final release of the upcoming suite is set for the first half of 2010

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Defections to OpenOffice.org, Google Docs, Zoho Docs and others have happened mostly among consumers and small businesses. With fewer users, it is easier for them to break free of Office's orbit and its $240 to $540 upgrades.

To keep them, Microsoft is offering Office 2007 Ultimate to students for just $60, or one-tenth its list price. Microsoft is also offering Office 2007 to military retirees and their dependents for $50.

For the first time since the mid-1990s, when WordPerfect and Lotus SmartSuite were still legitimate competitors, Microsoft is taking major steps to keep its most loyal and profitable customers: enterprises. It's letting cash-strapped companies thinking about terminating their Office contracts switch to software leases that are up to 26% cheaper.

More significantly, Microsoft is investing $7.7 billion in research and development (download document) for Office -- double its investment in Windows -- to broaden the Office 2010 menu and create an unprecedented number of choices so that companies have no financial excuse to switch from Office to a cheaper rival.

Sticking with Windows XP for the next several years? No problem; Office 2010 will run on Windows 7, Vista and XP, said Capossela.

Not upgrading from your old 32-bit PCs? Office 2010 will come in both 64-bit and 32-bit flavors.

If your IT department is retrenching as you shift operations into the cloud, take note: Office 2010 will come in a Google Docs-like Web version that will be partly or wholly subsidized by advertising.

And for those "deskless" workers who need only occasional access to e-mail and related services, Microsoft is offering Web-based Exchange and SharePoint at just $36 a year.

Many of these measures will cut mightily into Office's profitability. But they may also stanch enterprise customer defections in the near term, said DeGroot.

Still, DeGroot warned that the inertia propelling Office upgrades forward is "losing a lot of steam" among both smaller companies as well as "companies that started out bigger but need to find ways to reduce staff and overhead." And, he said, as "the online products get spiffier interfaces and more features, Microsoft could find it harder to pull these companies back into the Office orbit."

Copyright © 2009 IDG Communications, Inc.

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