Archive for December, 2005

Cannibalize your Consumer Software Business before Google cannibalizes it

Wednesday, December 7th, 2005

Google is righteously attacking Microsoft on it’s own turf with ‘Software as a Service’. Today, it’s Desktop Search, Google Base, etc. Tomorrow it’s going to be Excel on the Web, PowerPoint, Word, etc. The “standalone” consumer software esp. productivity applications between the boxed retail price ranges of $100-$300 are a solid target.
Office apps are prone to attack because a normal user of Microsoft Office does not use more than 80% of the features (which furthermore justifies a price-point of $20-$40 per year for all you can eat productivity apps. buffet). It’s a serious challenge for Microsoft. The onslaught is internal vs. external — on one side Google is spreading the “FUD” (a la Microsoft’s yesteryears tactics against ISVs) and on the other the steady stream of Microsoft Office’s revenue which is just shy of $11 billion. A bulk of this money comes from the enterprise licenses and MSDN subscriptions.
The survival strategy for Microsoft should be a combination of one or more of the following:
1. Offer a single user Microsoft Office (Word, PowerPoint, Excel) license for $50 bucks or less.
2. Have a supplanted offline/online version which allows users to install components on demand — it must be easy to segregate the components used by power users and average users.
3. Make the basic Microsoft Office applications an integral part of the Operating System (remember WordPad vs. Notepad?)
4. Have more than just the basic templates for Word, Excel, PowerPoint — Deliver things like spreadsheets which helps small businesses with their finances, taxes and day-to-day accounting (Small business data predominantly lives in Excel). Charge them a small fee for support on using these spreadsheets.
5. Charge money for support and not for software. Remember, smart web-hosting companies won the “commoditization” war by focusing on support and nothing else.
However hard Google or anybody tries (Google just signed a contract with Sun regarding OpenOffice); cracking the Enterprise market would be difficult. Microsoft must keep delivering there. Very few are going to use a free service, however fantastic it might be. E-mail as a free service is a different beast — it’s used for personal stuff. And yeah, nothing needs to be done now — Only if the “FUD” becomes a threatening reality.
Not just MS Office, the same stragey applies to pretty much all the consumer software applications which fall in that range and have an attractive revenue stream.
Happily, I work for none of these two companies!