You might not think word processing is the most thrilling topic - but think again. We are living in stirring times in the office suite market, and 1996 will be remembered as a year of extraordinary change and development unseen since the migration from DOS to GUIs.
From being the steady, slightly boring, pipe-smoking, bespectacled tweedy types of the software market, suites have become the unlikely leaders of a desktop revolution. Most of this is led by the growth of the Internet and intranets, but factors such as the debate over the Network Computer and the rise of Java have also had an impact. And it's really not surprising that these technological advances have made themselves felt so much in this arena because suites are an extremely lucrative business.
For the second quarter of 1996, Dataquest estimates that the worldwide suite market was worth $890 million (#527 million) in revenues, shared among the three main vendors. Of this, the lion's share went to Microsoft, which had 84.5% of the market, Lotus took 7.8%, almost level pegging with Corel at 7.7%.
Although there are some dramatic changes happening to the software itself, ongoing developments in the suite market tend to be more subtle. The main developments tend to be incremental - small changes in usability, little improvements in the interface, unobtrusive but useful new functions. They might not sound exciting, but they make a big difference in applications that many people spend most of their working lives using.
Going for the incremental improvement approach, Lotus' new version of SmartSuite is not, it has to be said, unbelievably exciting. A further beta was released last week and the shrink wrap is expected to ship in late November or early December. The company has admitted SmartSuite 97 is not a major upgrade, and it is unlikely to make anything like the splash Microsoft will with Office 97. This version is designed with Windows NT and 95 in mind. Typical new features include an improved auto-total feature in 1-2-3, and links to relevant Web sites from the help menu. Creating hypertext links is also easy, through calling up a dialogue box. Publishing to the Web is done through the standard menu.
Lotus' approach with its new version seems to be to use Notes to leverage the suite. Alene Gansemer, product manager with Lotus in the US, says SmartSuite will "have the best connectivity to Notes" - for example, it will be able to perform field exchange to Notes attachments. Lotus' relationship with IBM is also being exploited - the company claims SmartSuite offers easy access to legacy systems, such as IBM DB2, and makes it simple to work with legacy data file types. "Customers will be more productive in this paradigm now," says Gansemer.
Conversely, with Office 97, Microsoft is going flat out for flashy, exciting, in-your-face new features. This is in contrast to Office 95, which was rather subdued. The new release also marks a whole different strategy for the company, as the focus for Office 97 is firmly on the Internet and intranet. Microsoft has incorporated a raft of features for this purpose.
Office 97 will include HTML support to allow users to use the save as command on the file menu to publish direct to a Web address. Also included is hypertext linking, by which users can create hyperlinks to and from any Office file to any other file on an intranet or the Web. An autocorrect feature will automatically create links to Web sites on the fly when the user has typed in the http address. Office 97 will have its own Web toolbar allowing users to navigate through documents as they would Web pages through a browser. Like a browser, the toolbar will also hold search tools.
Microsoft Outlook is to be incorporated in Office 97. Dubbed a desktop information manager, Outlook allows users to access all their information from a single point on the desktop. It also integrates scheduling features, content management, task management and access to documents.
Aside from the intranet, Microsoft is also pushing productivity and customisability as key factors driving the development of the new release. Productivity will be improved by more advanced autocorrect and intellisense features, and the Office Assistant, a little animated help character intelligent enough to learn a user's usage patterns.
Improved customisability involves putting out a developer's edition and making VBA programming easier to do within each application in the suite.
New kid on the block Corel is an unknown quantity in this market, and seems determined to make its mark. PerfectOffice's market share has been in decline, and the company needs to pull out some tricks to arrest that trend. A new version of PerfectOffice created under the new company will be available next year, but in the meantime Corel's moving on.
Perhaps realising that competing on the desktop is going to be too bloody, or possibly taking a gamble on the future of computing, Corel is going to produce a version of its PerfectOffice suite written in Java. Codenamed Joffice, this version will be able to run on any platform. This is the crucial point - it enables Corel to break free from the shackles of Microsoft-dominated desktops and get a head start on potentially revolutionary new platforms such as the NC. Joffice should be available by the end of the year.
Corel is also prepared to be very aggressive, and drive the market forward.
CEO Michael Cowpland has announced the company is to make its own PDA.
With partners to make the hardware, Corel will "use the product as a vehicle to launch its own software", says Eric Lefebvre, European communications manager. The company has taken this approach rather than license its software to existing PDA makers because "it's easier to get the message across when you make it yourself", according to Lefebvre.
Corel is not alone, however, as a new and unexpected contender is about to embark on a similar strategy. Oracle is also planning to produce a series of personal productivity applications based on Java. Codenamed Hattrick, the product "essentially replicates the fundamental functionality of Microsoft Office in a much lower amount of code", says Ray Lane, president and chief operating officer of Oracle. He confirmed the product will have word processing, spreadsheet and graphical presentation functions and will run on the NC, on an operating system of Oracle's devising. There are expected to be further announcements on this project before the end of the year.
Developing excellent software is a very costly business. Microsoft pours money and developers into Office. Robert Bach, director of marketing for desktop applications at Microsoft US, says Office 97 had twice as many development hours put into it than Office 4, the previous biggest effort.
He says that over the past two years 75% of the desktop development team has worked on this product, compared to 25% on Office 95. However you look at it, that's a lot of development muscle.
But other companies find it difficult to match that spend. One aspect of the connectivity to Notes is the integration of Lotus Notes Components with the suite. However, in SmartSuite 97 only WordPro can be used as a container for components, rather than the suite itself or any other application within it. Lotus' Gansemer disclosed that the company was looking at spreading this functionality across the suite, but says it had not done so initially because of "the question of dividing up the resource dollar".
This is a very revealing remark. If Microsoft's rivals can't afford to keep up, the battle may well be over.
Microsoft has stressed this point on many occasions. Oliver Roll, Office product manager at Microsoft UK, says: "A huge development resource is needed in this market. No other suite has the same development commitment as Microsoft Office and that's why it is the most successful product in the corporate sector." Referring to Corel's price-cutting strategy, he scoffed that "no corporate will have confidence that at that price point Corel can continue to put in the development needed to produce world class applications".
The high cost of development is a big barrier to entry into this market.
Only true heavyweights like Oracle could even think of trying to take a slice of this market.
Some companies have taken a different tack. They are going for lightweight suites as an alternative to the large, resource-hungry Office suites we are used to. Users don't even know what half the features are in existing Office suites, runs their argument, let alone need to use them. Even established suite vendors admit some of this is true. "Customers just want what they need," says Jim Moffat,Lotus' product manager for SmartSuite in the UK.
"They don't even use many of the features they have." So why not cut down on the features and functions, which, says the theory, should also cut down on resource needs, user training time and price?
This has been the approach taken by Claris. Already leader in personal productivity software for the Macintosh, the company has been trying to make headway in the Windows suite market with ClarisWorks, a cut-down office suite which sells for #129.
Tony Speakman, Claris' UK country manager, says Claris' reason for being in business is "productivity rather than power and performance and cleverness.
It's for users who don't want that extra functionality - we provide customers with just the tools they want."
One recent startup company has been even more radical in its thinking.
The brainchild of ESP founder Michael Skok, AlphaBlox sells component application building blocks, designed to scale from the desktop to the Internet. These component software products are, according to the company, mini application building blocks which focus on a very specific function, such as calculation or data management, and which can be easily assembled either with or without existing software to produce customised applications.
AlphaBlox also sees itself as ready to grasp the opportunities of the NC and the internetworking market. The idea is that users should be able to download small apps from the Internet as and when needed. One area where this approach could work particularly well is for users of NCs, without large local hard drives on which to keep their monolithic office applications.
Predictably, Microsoft has poured scorn on this idea. "Arguments about so-called bloatware are misguided," says Roll. "Corporates like Microsoft Office because it increases workers' productivity by automating key tasks and business processes. Stripping Office down would make it less intelligent, and customers don't want that."
Microsoft sets the pace in this market as it does in so many others - start-ups such as AlphaBlox will have a tough time competing with such an established leader.
As Microsoft makes most money from this market, it can in turn pour more development dollars into making its product even more flashy, even richer in functionality, even more tightly integrated. This makes it increasingly difficult for other vendors to get a look in. Also, having such a large market share creates its own momentum. As Windows became pretty much an industry standard, just through being so popular, so Office may become a de facto standard as so many corporate customers continue to adopt it.
For the first time, however, some factors that may inhibit Microsoft's seemingly inexorable rise are now in place. Purveyors of doom may claim Dataquest's report on the decline of the suite market heralds Gates' downfall; most will be rather sceptical of that. Some visionaries see the introduction of lightweight components, like AlphaBlox, as the means to destroy Microsoft's domination. Others, like Oracle and Corel, believe that a migration to non-Wintel platforms such as the NC will bring about a revolution.
There's something to be said for all these theories. But if PC Week could tell the future we'd be living on our lottery winnings in the Bahamas. Historically, Microsoft has been extremely good at adapting to changing circumstances, and will fight its corner fiercely against any threat. The betting must still be that heavyweight office suites running on Wintel platforms will continue to be the major desktop application, and that Microsoft will continue to be top dog.
MARKET SHARE: PLAYING THE NUMBERS GAME
Think of a number. Double it. Stick a percentage sign on the end, find a handy market research company to back you up, and call it your market share figures.
The above may be a slightly cynical analysis, but sometimes it does seem that that's how companies work out their share in this market. Figures are constantly disputed as companies play the numbers game.
Dataquest gives Microsoft only 66.3% of the market by unit shipment for Q2 1996, with Lotus on 26.3% and Corel with 7.5%. This represents a considerable gain for Lotus, up from 12.4% for the same period in 1995. As Corel/Novell's share remained steady, Lotus' gain was entirely at Microsoft's expense.
Lotus' success is attributable to its aggressive bundling program - SmartSuite is shipped with Packard Bell machines, and the IBM Aptiva.
Corel can play the game too. Its recent marketing campaign has centred on research from US market research company PC Data, showing that PerfectOffice took a 50.9% share. Closer inspection shows that PC Data's figures only relate to retail office suite sales in the US for the month of July. Eric Lefebvre, European communications manager for Corel, admitted the figures may have been unusually good, boosted as they were by the shipment on 27 June of the latest version of the suite. And Corel traditionally does very well in the retail segment, where its traditional strengths lie.
The challenge for the company is to make inroads into Microsoft's strength in the corporate arena.
But there's more to worry about than that. If predictions from Dataquest are correct, the heyday of the suite market may be almost behind us.
Dataquest's latest research shows the suite market "showed early signs of slowing down in the second quarter of this year". The company points to a 24.3% growth rate during the second quarter of 1995, compared to its rate of only 2.3% for the same period this year. If this trend continues, Dataquest's analysts say, there could be serious ramifications for Microsoft and the entire software market.
"Microsoft relies extensively on suite revenue and profitability to drive its overall business, so any sort of a slow down will concern it," says Dan Lavin, a senior Dataquest analyst. More optimistically, he adds that "this market is still astonishingly healthy and profitable", but cautioned that "these early warning signs warrant careful attention".
Microsoft's Oliver Roll scoffed at Dataquest's figures. "They are not representative," he stated. Roll claims the figures are distorted because they include OEM sales, and sell-in to the channel rather than sell-out to the customer. Most of Lotus' suites that are bundled with machines are not used, he claims, and though Corel has stocked the channel, it is not selling through to customers. With Lotus preferring Dataquest's figures, and Corel citing PC Data's, Microsoft's favourite research firm is Romtec.
Romtec figures include upgrades to suites already held, but do not include OEM sales and measure sell-out of the channel rather than stock. Romtec, taking an average from January to July 1996, gives 86% of the UK office suite market share to Microsoft, 12% to Lotus and 2% to Corel. Roll also claims that the applications business as a whole is growing by 30% a year worldwide, and the UK suite market is growing by 15%.
So take your pick from the figures that suit your suite.
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