Is Microsoft Office Invincible, Indeed? - Part Three

As a matter of fact, Microsoft is a franchise company

Every year, Microsoft holds Worldwide Partner Conference. In 2011, it was held in Los Angeles. Not surprisingly, 95% of Microsoft's revenue is stemming from their partners and the number of partner companies in the World is up to 1.3 million.

Microsoft Worldwide Partner Conference 2011, Keynote

From 2001, Microsoft started to drive 3 year cycle licensing model for their Office suite instead of selling shrink-wrap packages.

A great invention, software franchising + licensing model

After that, this business model significantly affected customers, and partners as well. Especially, in this scheme, partner structure was necessary component. And by making partners to stay for foreseeable revenue stream, Microsoft could build a huge and strong ecosystem embracing partners. It was a deliberately designed great invention of delivery model at that time and maybe it can match the invention of App store today. 

Some Microsoft volume licensing programs

Fundamentally, the model led a change from sporadic connection to contractual relationship for the product, to staying always in a program with ideally perpetual recurring licensing. Over a decade, it may be not an exaggeration to say that there isn't any company, which has some scale, unreached by their partners. This franchising has been so successful that the other players in the market cannot help facing another hurdle challenging long-established chain among partners and IT departments in nearly every company. 

And contenders, finally, may find that it is not easy to prove the benefit from TCO against MSO's licensing model deliberately designed for and locked in not only other Microsoft software components but also nearly every aspect of convenience on maintaining contracts.

On the other hand, Microsoft's WPC, in 2010, was different a little bit. As Steve Ballmer had been stressing Could All-In from early 2010, Microsoft had to explain how this will affect  partner relationships at that conference. 

After introducing SaaS as a new viable delivery model, Microsoft started to face challenges from market disruption. Although Microsoft has been experimenting with various delivery models for years, they aren't likely to take an approach with an entirely new design of delivery model. Microsoft will keep deliberately taking a two-pronged approach with Office 365 and gradually tightening locked-in user experience. 

Advent of new battle of ideas for new level of abstraction

Still, the franchise seems invincible at this moment. However, Microsoft should keep delivering tangible value into market for justifying license fee that keeps raising every year for sustaining their huge ecosystem. Inevitably, this approach also will keep introducing complications. That's where Microsoft's dilemma exists. History always showed us that simplification by new level of abstraction is derived from over excessive complication. The market seems to have started to turn into new battle of ideas already.

• Part one: Network effect, the characteristics of Office suite market 
• Part two: Another standard, user experience 
• Part three: As a matter of fact, Microsoft is a franchise company
• Part four: Growing opportunities and new battle of ideas

    

Is Microsoft Office Invincible, Indeed? - Part Two

Another standard, user experience 

The installations of WordPerfect was estimated 4 million to 5 million in 2010. And it's revenue was estimated to $49.4 million in 2009 by Gartner. 

Although it’s market share keeps shrinking by intense competition and the market interest does not seem to exist for the product, but the revenue is still not so negligible and there is something interesting. 

In legal market, it’s influence and the affection to the product were conspicuously long lasting. It is most likely due to some distinct features in WordPerfect. One of them is very nice paragraph numbering and another is ‘reveal code’ that is a function to show all the formatting codes, so that the resulting document doesn't have any strange hidden areas. 

Reveal code in WordPerfect

These features might result from the efforts to focus on legal market defensively. Interestingly, it shows that once user experience on any functionality is accustomed and occupied for a long enough period time, users can be stubborn to stick to that experience. And user experience seems to be mostly bound to user interface and functionalities.

Adversely, this fact seems to lead most of competitors, even Google, to abandon their unique user interface by cloning MSO's. And it lowers entry barrier and learning curve obviously.

Furthermore, some players seem to be obsessed by perfect cloning at the cost of sacrificing their uniqueness. It seems to make it able to reduce costs for development and marketing but, at the same time, it looks like to make their deficiencies much noticeable by allowing direct comparison with MSO and undermine their credibility unfavorably. 

Koingsoft Spreadsheet 2010 (*image from softpicks.net)

The cost for migration doesn't seem so impractical

Unlike the inherent obstacle from network effect we've seen in the previous part, many  researches on migration from Microsoft Office to another product including Michael A. Silver's "Cost Model for Upgrading Microsoft Office or Moving to OpenOffice.org" seems to provide some grounds that the user experience itself bound to the user interface and functionalities can be adjusted to new application with affordable costs. 

However, it cannot be denied as well that users are strongly inclined to stay their experiences, if the change is not enforced. 

There remains another crucial user experience which is profoundly challenged by Web-based Office suites. It will be addressed in the last part. 

• Part one: Network effect, the characteristics of Office suite market 
• Part two: Another standard, user experience 
• Part three: As a matter of fact, Microsoft is a franchise company
• Part four: Growing opportunities and new battle of ideas

*The dispute over the rise and fall of WordPerfect has been lasting for a long time. If you are interested in the history of WordPerfect. "Almost Perfect" by Pete Peterson is worth to read.