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Summary:

It was only a few years ago that Microsoft was dismissing SaaS and remaining silent about cloud computing in general. Disruption at the software layer is showing why Microsoft has concentrated heavily on the Azure infrastructure and platform plays. So what’s happening at a software level?

It was only a few years ago that Microsoft was dismissing software-as-a-service (SaaS) and remaining silent about cloud computing in general. Its public cloud strategy was firmly entrenched in a software-plus-services play that left much to be desired. Disruption at the software layer is showing why Microsoft has concentrated heavily on the Azure platform play, and from it, has made its claim that “We’re all in” on the cloud. There aren’t many companies that can compete with Microsoft when it comes to building mass-scale data centers tied together with smart software, and huge chunks of resource are being used on this part of the business.

As we detailed recently, Microsoft intends to aggregate mass data on Azure through its Dallas project to allow developers to build products that hook into Office in order to make the suite more compelling. In the interim, however, productivity applications are moving on, so what’s happening at a software level?

Microsoft seems to have an ambivalent attitude towards providing truly rich online experiences for their office productivity applications. There are however a plethora of competing offerings that, in many cases, provide all the functionality that customers need, in a very economical package. So which companies are helping steer the Microsoft mother ship on its change of course?

Alternative suites

The most well-known product in this space is Google Docs, which, despite having low uptake when compared to Microsoft Office, is gaining lots of media attention and a strong following from those who need a slimmed down — but web-enabled — office suite. Coming from a slightly richer functionality angle, Zoho provides a fuller set of applications than Google Docs, but is somewhat hampered by a much smaller profile and user interfaces that, while improving, have previously been somewhat clunky.

Cloud content management

These companies tend to be application agnostic, but create a cloud-based environment for content storage that can then allow a degree of collaboration to occur. The thought here is that customers are used to the applications they currently use, so the best approach is to create a content management shell which is file format agnostic but allows for check in/check out, revision tracking and the like. Box.net is the poster boy for this approach, but offerings like Syncplicity (see disclosure) and Dropbox that were formerly simple cloud backup are starting to move into this space as well, as I discussed recently.

Microsoft Office sharing tools

Vendors in this space adopt the Microsoft Office applications that office workers are used to, but overlay them with a rich collaboration tool. Most notably, CentralDesktop has just released a tool that allows multiple users to simultaneously co-author Office documents in real time. Interestingly, this is the same functionality that users can obtain with SharePoint/Office 2010, but with CentralDesktop, it’s available for all versions of Office back to 2003.

Back in May, I wrote a post to mark the release of Office 2010; in it, I talked with a number of cloud software vendors about where they see the market heading. Chuck Dietrich, CEO of Sliderocket, summed up the issues facing Microsoft Office in this quote:

Microsoft’s revenue is dependent on selling old-school packaged software, continual upgrades and hardware…the truth is, Microsoft cannot embrace the cloud, because a subscription-based software delivery model would cannibalize their short-term revenues. Office 2010 is another attempt to sell upgrades and hardware, not an innovative web-based application.

Faced with a market situation like this, Microsoft has done the logical thing by choosing to focus on areas where startups can’t compete as readily. Azure gives them this luxury, while Office will continue to be problematic for them.

Related GigaOM Pro content (sub. req.): Enabling the Web Work Revolution

Ben Kepes is an independent consultant and contributing writer for GigaOM. Please see his disclosure statement in his bio.

Disclosure: Syncplicity is backed by True Ventures, a venture capital firm that is an investor in the parent company of this blog, Giga Omni Media. Om Malik, founder of Giga Omni Media, is also a venture partner at True.

  1. Well, that was lame. Was there a point to this article? We know about Google Docs and Zoho – they have been around for years. Dropbox et al are simply file sharers – there are literally hundreds and even Microsoft has one is Skydrive. So we are left with Central Desktop – a very lame looking product that does rather less than Sharepoint for about the same amount of money.

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  2. From the title I was expecting an announcement about some new company taking on MS. But just a rehash about Google Docs and Zoho. Hardly worth the screen space.

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  3. I’m always surprised at the raw hatred directed at Microsoft over their Office product line. I guess I’m old enough to remember when WordPerfect, Lotus, and DBIV would set a person back $1000.00 (that was when $1000.00 was alot of money) and they didn’t work together. You can now get Office 2010 (Student) for $121.00 at Amazon.com.

    Microsoft drove the prices down on these things when they started offering integrated packages. And while the challenges of the Freeware is also helping to drive prices down all the poo about Office being some big bad money sink is silly at best. I suspect it’s just the new crowd of young freetards that steal all their music, videos, and games who are are the loudest objectors to actually paying someone for their work.

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  4. A pity you didn’t bother to differentiate between those that offer free plans and those that don’t (and give pricing) as well as showing those that are OS agnostic (Dropbox for instance) and those that work on Windoze only or offer Mac as well or (holy grail for me) offer a Linux friendly service. Without such information your article is incomplete at best and, in reality, lands your users scouring the services you mention to glean this, basic, information.
    BTW most of the services you highlight have been around for long enough and are now big enough and well known enough, LOL you even have Google in there (!), not to be classed as startups so the title of your article is simply ridiculous.

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    1. David, pricing is a separate issue. The majority of companies mentioned offer a freemium model. Similarly the majority of the apps discussed are web apps (you might have heard of those?) and hence discussion about the OS is out of place. Thirdly in the context of MS’s hundreds of millions of customers, all of these services can be considered nascent…

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      1. @ Ben,

        I think that consideration of OS support is still relevant even with web apps…consider this, Zoho offers a desktop plugin but it only works on Windows or Mac so for me, as a Linux user, their service is lessened by this omission. Syncplicity describes itself as offering downloads for Windows XP and Vista…nothing there for Mac or Linux. Box.net on Linux is not impressive. It is horribly slow when run via Nautilus (Gnome) or Dolphin (KDE) and their own software doesn’t work on Linux anyhow…to use it in any worthwhile way you have to fiddle with davfs2. Sorry to say so Ben, but the OS you use with these services is a pertinent issue and has a big effect on which one a particular user may elect to use.

        My point regarding your title is that it claims to discuss startups and yet some of the companies it discusses are far from being what most readers would expect from that term…Google being the most obvious case in point.

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  5. On the Web I use Google docs.

    On the desktop I switched to OpenOffice.org and never looked back. I’ve got it running under Windows & Linux. FOSS hello, MS bye bye!

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  6. Ben, you might want to take a look at HyperOffice, which brings an integrated web based SharePoint and Exchange alternative. We operate in the Google Apps and Microsoft BPOS market (integrated communication and collaboration) but bring considerably more experience in SaaS (since 1998) and a laser focus towards SMBs.

    We were covered as a “SharePoint alternative” and “Exchange alternative” in prominent publications recently:-

    http://www.thevarguy.com/2010/08/13/saas-at-least-seven-rivals-targeting-microsoft-exchange/

    http://www.cmswire.com/cms/enterprise-cms/sharepoint-portal-alternatives-a-credible-list-005080.php

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  7. I’m with the other commenters — there’s no story in this story. Seems to me MSFT is in good shape. As pointed out in the article, the company is in good shape building a cloud platform. And, whine all one wants, there’s really nothing better than Office. You simply can’t do in any online “office” suite what you can in Office.

    How about an article, on OfficeLive? Where is MSFT going with that? For me, collaborating via a local PC version of Word or Excel connected to other users, with online sharing of changes, has been much more responsive and workable than Google Docs.

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    1. 80/20 rule Ken. The vast majority of people don’t need the mass functionality of MS Office and for them a Google or a Zoho works just fine to speak to your point about responsiveness and workability…

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  8. The whole idea of a ‘Office Suite’ implies deep integration between the various apps. MSFT office suite really IS NOT that…it’s more like a number of separate pieces of desktop software that happen to be sold in a single bundle – that’s not so sweet. We use Google Apps internally and a number of WELL integrated 3rd party solution. We make our own true suite of apps that is well suited for our business.

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    1. Interesting contention Chuck, and having seen the exciting things that can be done with integration between Google docs and various other web apps, I’m inclined to agree with you there…

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  9. [...] link: Startups Aim to Chip Away at the Microsoft Office Empire Tags: azure, cloud-computing, few-years, microsoft Leave a Reply Click here to cancel [...]

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  10. I have to admit that – although I get the convenience and TCO benefits – I was always skeptical about the practicality of web-based productivity software. (I wasn’t impressed with Google Docs at all)

    But then, someone showed me ietherpad, and it just blew my mind. Now I really see a lot of potential in this space.

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