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Office 11: What's new - and what's missing
Under the bonnet of the new Office

By Joe Wilcox

Published: Tuesday 22 October 2002

Microsoft has slated the next version of Office for a mid-2003 release, and plans to release the productivity suite to about 6,000 beta testers within Microsoft and another 6,000 external beta testers shortly. Only select testers will have access to this first beta version, although Microsoft plans a more widely available Office 11 test sometime in the first quarter.

Microsoft hasn't fully disclosed the new features of Office 11, beyond greater XML integration. The software maker did say that Office 11 will include a revamped Outlook email client. The software giant has moved the preview pane, which will now use technology found in Microsoft Reader, to the side of the screen.

Microsoft also is introducing what it calls "Search Folders," which allow the same piece of mail to appear in multiple folders. In addition, the new product will pick up extra features when attached to an Exchange "Titanium" Server, such as a special cache mode that speeds up accessing the Outlook email data file.

One planned component of Office 11 has been shelved. Microsoft had been considering offering additional web services derived from the company's stalled .Net My Services initiative. Office 11 users could have subscribed to additional web services - such as online calendaring and web-based email - that would have been an adjunct to the productivity suite, but Microsoft essentially has scrapped this plan. These additional services, if any, would be provided by third-party developers, not Microsoft.

"We had talked earlier about a rich web services environment with Office 11," Gytis Barzdukas, director of Office product management at Microsoft, said. "We've actually scaled back from that. You may see some partners doing some of that. But (as for) Microsoft actually hosting some of those services, we actually scaled that back."

Longer term, Microsoft needs to show customers that have signed up for the company's controversial new software licensing programme that they get value for their money, analysts said. Under that program, many businesses now pay an annual fee for upgrades over a two- or three-year period, putting even more of the onus on Microsoft to deliver new versions in a timely manner. Microsoft last updated Office on 31 May, 2000, with Office XP.

To qualify for discounts under Microsoft's new licensing programme, companies are required to move to the latest version of Office. The company estimates that 70 per cent of customers purchased Office XP licences, although many have not actually installed the software.

Gartner analyst Michael Silver said he thought the percentage to be "rather high," but that it "shows the success of Microsoft's licensing strong-arm tactics." Gartner estimates that Microsoft's Licensing 6 plan raised the majority of customer fees for Office and other Microsoft products anywhere from 33 per cent to 107 per cent.

With 70 per cent of users - the majority of businesses - committed to Office, Microsoft needs to give customers value for what they already paid for and look for other ways to generate new revenue associated with the productivity suite, analysts say.

One way to do that is to further integrate Office into crucial business and back-end server products. That could drive sales of new and existing server software - such as the SQL Server database and Exchange messaging software - as well as sales of client-access licences (CALs) for desktop PCs running Windows and Office.

"Office is going to end up with more servers connected to it eventually," Silver said. "You will see Microsoft do more to extend the Office brand, making more server dependencies and generating more CAL revenue."

Given the software maker's ongoing antitrust case, Microsoft also may be taking a risk in trying to further integrate Office into business processes and at the same time reach back to the server, analysts said.

"Microsoft has proprietary lock on the desktop," Forrester Research's Schadler said. If they were to use that lock-in to sell more servers, they'd be in court so fast. They would be using their monopolist position on the desktop to sell more servers, and that's anticompetitive."

Microsoft has a broader strategy at work that could benefit customers and also give the company a way to grow revenue. Besides the XML integration, Office 11 will include a new product known as XDocs. With XDocs, users can pull together disparate data from Word, Excel and other Office 11 applications into a form-like document for easier viewing or tabulation.

Microsoft plans to include XDocs with this week's Office 11 beta, but has made no decision whether the product will be included as one of the bundled applications or sold separately, Barzdukas said.

Microsoft wants to make Office the primary means by which companies access and generate all the data in their business operations. "You're going to use Office for more purposes than you do today," Schadler said.

The software giant's goal is to double Office sales this way, even though the market for the product is saturated.

"If Microsoft can get people to write their applications to Office and make it part of their business processes, it's harder for people to throw Office out and replace it," Silver explained. "They can make it an integral part of actually getting the business done, instead of (using it for) just writing letters."

"XML makes Office a rich client for web services and to fit into larger business processes," Barzdukas said.

As Office evolves into a platform for developing XML-connected documents, businesses could start a new cycle of application development that could also benefit software makers other than Microsoft.

"We think it's a good idea and customers will benefit from the changes," Schadler said.

But again he cautioned that opening up the file formats with XML means some things might go against Microsoft.

"Sure they want to sell more servers," Schadler said. "That's an important connection to make here. There's no guarantee Microsoft's going to have a better server product for pumping data into Excel than Oracle will or IBM will."

Joe Wilcox writes for News.com