"Office is the Browser" - Microsoft

Hosted office applications are getting better, and are providing more and more functionality that is generally available on Office Desktop applications. Suites like GAPE and Zoho are providing functionality that is pretty close to what most people expect and use.

As Google, Zoho and a number of other SaaS firms bet on the providing rich functionality over the browser, Microsoft is attempting a contrarian strategy.

According to Microsoft, Office applications like Word, Excel and Outlook can be front ends for more complex back-end applications like SAP etc. This integration benefits

• the back-end application vendors through additional seat license sales, and consulting revenue through integration,
• increases Microsoft Office sales,
• and makes it more difficult for enterprises to switch to another Office application easily later.

Most firms have been using Excel to query and analyze databases and create usable reports, and Office Business Applications formalizes this process. However, the success of this strategy depends how competitive SaaS offerings can be to Microsoft Excel, which has been the undisputed leader in its class.

I see 2 key challenges to Microsoft Excel's dominance in the market.

• Google's ability to outprice Microsoft in its "free hotdogs, just buy mustard" offering.
• Office 2007 - which has been a significant change - and has not been adopted widely among the the most common users yet, and upgrades are likely to take some time to verify that integrations with previous Office versions work with the newer version as well.

Office 2007 has a significantly different look and feel, and there is a learning curve associated with using Excel 2007, after you have become used to the previous version. Also, Enterprise IT organizations have been waiting for any significant problems to show up and be fixed in Service Packs before adopting the new version. Given this uncertainty around Office 2007, both Google and Zoho have a unique window of opportunity to push and get SME's to adopt their solution instead of Excel.