Office XP Plan Riles Partners

A week before Microsoft's multicity Office XP launch, Sun was calling reporters about StarOffice 6, which it claims will be dramatically faster than its predecessor--especially on start-up--and let users launch single applications rather than the whole suite. The beta is due in six weeks, with final shipment slated for fall, says Gina Centoni, senior director of product marketing for Sun Microsystems' Webtop applications.

Centoni says she clearly hopes the flap surrounding Office XP licensing changes will boost StarOffice, which runs on Solaris, Windows and Linux and promises file compatibility with Microsoft applications.

In licensing changes disclosed to corporate customers in late March, Microsoft nixed competitive upgrade pricing from rival suites and cut out product upgrade pricing from single Office applications to Office as a whole, according to Gartner Group. It will also not offer upgrade pricing to users who have older Office versions like Office 95 and Office 97.

The research firm concluded that upgrades to Office XP could cost between $400 and $800 per desktop.

Microsoft executives say the company is only trying to simplify what has become a complex task for corporations. Internal analysis showed that 80 percent of the company's volume customers will pay essentially the same as now or slightly less with the licensing changes, says Simon Hughes, program manager of Microsoft's worldwide licensing group.

While agreeing that licensing has gotten way too complex, corporate users and resellers worry that Microsoft is trying to force more-frequent upgrades and effectively raise prices at a time of economic downturn.

"They are forcing people to get current and stay current or lose upgrade pricing," says Al Gillen, research director at IDC.

Office XP licensing changes were "incredibly ballsy," says a corporate integrator who requested anonymity.

No one will go through a disruptive upgrade unless there is real value in doing so, says Bill Walker, owner of Service Solutions, a reseller in Davenport, Iowa.

Microsoft has a mixed record in that area, resellers say. "There were major changes between Office 4.3 and [Office] 95, and there were excellent changes in moving from [Office] 95 to [Office] 97, but the difference between Office 97 and Office 2000 were incremental," Walker says.

Even some Microsoft insiders agree. "There's no reason to upgrade Office," one insider says.

A former Microsoft executive says that is the real reason behind licensing changes: Upgrade rates for Office are "very, very low," he says.

Wall Street is concerned about that, as well. Several analysts questioned Microsoft executives on the Office upgrade cycle during the company's earnings conference call late last month.

But Microsoft's financial interests do not always coincide with those of its enterprise customers. An IT executive at a Fortune 100 company says few companies of that size will go through an upgrade more than once every three years. "There are tons of people running Office 95 still."

Others are more amenable to change. "We always want the latest software so we always upgrade. But people who buy software and sit on it may not be happy," says Sheldon Laube, chairman of CenterBeam, Santa Clara, Calif.

It is unclear whether all of this hubbub will breathe life into the competition.

"They've pissed off an incredibly large number of people but the feedback is, 'What do we do about it? We're tied to Microsoft,' " says Rob Enderle, an analyst at Giga Group.

But even in what may seem like a one-horse race, there are always alternatives, says IDC's Gillen, citing Linux and OpenOffice efforts. The applications people end up running must be able to tap into existing Office files and data, he says.

Jim Mathieu, senior engineer at A.B. Watley Group, says the Allen, Texas-based company is moving to Sun's StarOffice and is pleased with its stability and ability to handle existing Word and Excel documents.

Cynics might say Microsoft can cut competitive upgrades now because there is no longer a real Office competitor. Lotus SmartSuite is on life support, and Corel's WordPerfect Office is not doing much better, they say.

"If WordPerfect hadn't died a horrible death and this were a competitive market, there'd be a whole different story," Walker says.

Microsoft's moves, including its foray into subscription licensing, announced earlier this month, have pleased the Linux faithful. "Even without a move like that, customers were already beginning to really look at their options, especially when those options are competitive," says Moiz Kohari, CEO of Mission Critical Linux, a solution provider in Lowell, Mass.

Sun is making the most noise now with StarOffice. Asked if the current situation could boost StarOffice's market share, CenterBeam's Laube said, "Star who?"

Sean Keating contributed to this story.