Microsoft feels pressure to make 'free' online software

Microsoft is poised to release the latest version of Microsoft Office, the wildly successful — and profitable — office software that runs on many corporate and home computers today.

Office 2010 will come out officially early next year and will feature a Web-based component to compete with Google's online office suite. That means at least part of Microsoft Office will move online for free, at least for some users. That will give users online access to many popular Office features via a Web browser (likely Internet Explorer) for collaboration and sharing of data. I would expect the cost to be subsidized by online ads next to your document or spreadsheet.

The new Office suite, meanwhile, will include lots of new revisions and features, some of which have not been completely disclosed. Generally, they'll focus on allowing users to work together easier and faster. Workers often are in different locations and wish to work together on spreadsheets and documents. A pre-release version is being offered to some users this month.

Microsoft's real struggles are over how to price this product and how to handle the online component. Give away too much Office online and the company risks giving away a huge financial portion of its business; Office and Windows are the most important products in Microsoft's portfolio. Give away too little, and Google eventually will eat Microsoft's lunch. In lean times, companies will look at Microsoft's Office product at a couple of hundred dollars a seat and Google at zero per seat and think, "Hmmmm." Free may be more compelling even if Google's offering is not as good.

I think Microsoft will start off slow, maybe with just Word and Excel — light versions of them, at that — and then gauge the marketplace's reaction. I doubt most consumers will embrace online Word and Excel versions anytime soon. For one, consumers are not flooding to the Google versions in the numbers that company had expected. For two, OpenOffice poses a wrench in the engine.

Anyone can download OpenOffice today for free at openoffice.org. The open-source site offers a full-featured Office suite for nothing: no advertising support, no nothing. Just download it, install it and go. Some colleges and businesses have already moved to OpenOffice to save money, and I expect others to give it a look.

The real interesting development in computing today is the move toward "free" software such as anti-virus products (look for Microsoft's soon), office suites, browsers, image manipulators and more. Many smart and talented developers are willing to give their talents to the open-source community, for one. Companies such as Microsoft are reacting to market pressures from existing free products.

What it means to the consumer is more and better free stuff in the weeks and months to come.

James Derk owns CyberDads, a computer-repair firm. E-mail him at jim@cyberdads.com.