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Microsoft's grip on users is being lost in the cloud

September 03, 2009|MICHAEL HILTZIK

The other day I had a vision of the death of Microsoft.

It came just hours after I placed a curse upon the huge company for, oh, the ten-thousandth time.

The occasion for my latest malediction was the discovery that Microsoft had dispensed with the "backward compatibility" of its Word application. As a result, a document created in, say, Office 2007 and e-mailed for my perusal won't open in the Word 97 program on my home computer as anything but gibberish.

Microsoft's goal obviously is to coerce me to upgrade to the new version of Office, which would cost me as much as $400, take up an enormous amount of my hard drive space and undoubtedly consume obscene quantities of my computing power.

It would also provide me with dozens of features I don't need and will never use (in the same sense that I can't buy ESPN from my cable service without also getting Lifetime). But let that go.

By sheer serendipity, I shortly discovered that if I tried opening that same illegible document via my Google Gmail account, Gmail could open it just fine. It was then an easy matter to transfer its contents to a Word document that my computer could read.

And that pointed to the question: Why should I, or anyone, spend another dime on a Microsoft Office upgrade?

For Microsoft this is a nontrivial issue, as an engineer might put it. Office accounted for nearly 30% of its revenue and more than half its operating income in its most recent fiscal year, which ended June 30.

Of course, not all of its Office revenue is at risk. Plenty of customers have reasons to license the most up-to-date iterations of Microsoft applications, including business users who need to standardize software for their entire workforce. Presumably there also exist retail consumers with specialized needs who can put Word 2007's more arcane features to use better than I. And not everyone owns a vintage Office 97 disc, as I do, to transfer trusty old Word 97 to new computers when they upgrade their hardware.

Moreover, the alternatives to many Microsoft products aren't so great. Google offers a suite of Office-like applications such as a word processor, spreadsheet and presentation program similar to Word, Excel and PowerPoint for free use online. Although none is as oppressively overstuffed as their Microsoft analogues, none is quite as serviceable as even the decade-old versions on my computer. But what's the over/under on how long it will take Google to polish them to the point of adequacy? A year? Six months?

Microsoft acknowledges that its consumer sales of Office have slipped, in part because retail buyers are shifting to "lower-priced products" -- with Google's zero-priced offerings presumably high on the list.

So what does it say about the company's future if it's beginning to lose control of its cash cow? It wasn't so long ago that the prevailing image of Microsoft was as a juggernaut on its way to world domination, like a James Bond villain. The fear that it might become unstoppable is what provoked the U.S. and European governments to spend many years and millions of dollars and euros pursuing it in court

Yet it now looks as though the Internet has accomplished something that antitrust regulators failed to do -- break Microsoft's ability to monopolize software markets.

Microsoft exercised its dominance in part by bundling applications with its Windows operating system on new PCs, making it hard for competing software to get a foothold. Its crushing of Netscape in the 1990s browser wars was the signature exhibit of this tendency. (Netscape has since risen from the dead in the form of Mozilla's free Firefox browser, developed from its old code.)

But as applications move up to the network and the need to keep them on one's own computer ebbs, so does Microsoft's power to dictate what its customers use. This undoubtedly contributed to Google's strategy of challenging Microsoft with its own stripped-down Chrome operating system and Web browser.

All this leads us to another phenomenon you will be hearing a lot more about: "cloud computing," which signifies the network of big computers where your software applications and, increasingly, your data, will reside rather than on your home or office hardware. It's already where your Google documents and e-mail are found, for example.

Cloud computing will make those files and data more accessible -- you can open them anywhere you have an Internet connection while reducing the demand on your own computer storage space and computing power -- but it raises issues of privacy and ownership that we haven't begun to resolve.

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