I.B.M. to Offer Office Software Free in Challenge to Microsoft's Line
I.B.M. plans to mount its most ambitious challenge in years to Microsoft's dominance of personal computer software, by offering free programs for word processing, spreadsheets and presentations.
Context & Ripple Effects
Two weeks after the Times reported Microsoft pushing software delivery into the internet 'cloud' (Software via the Internet: Microsoft in 'Cloud' Computing, September 2007), I.B.M. answers from the opposite direction: a free desktop suite, Lotus Symphony, aimed squarely at the Office license line that funds Microsoft. The announcement traveled unusually far for an enterprise product — picked up same-day by the Wall Street Journal, Ars Technica and Ed Brill's Lotus blog alongside the official release.
The move lands while Microsoft is already under scrutiny on multiple fronts, and company watchers have characterized it as softening some practices ahead of the court ruling. A rumored shift in the global market around Outlook and Lotus Notes remains unconfirmed, but the free-suite gambit makes the Notes-versus-Office battleground explicit rather than implied.
First-order effects
- I.B.M. converts Symphony into a zero-price wedge against Microsoft Office, betting that giving away word processing, spreadsheets and presentations will pull customers toward its paid Lotus collaboration stack.
- Microsoft faces a direct price attack on its most profitable franchise at the moment it is also repositioning toward cloud-delivered software.
Second-order effects
- Rival suite vendors and web-based office tools get a price umbrella lifted: once a major vendor prices the desktop suite at zero, per-seat Office licensing becomes the thing every competitor markets against.
- Enterprise buyers gain negotiating leverage over Microsoft, whose response options — discounting, bundling, or accelerating its own online versions — all erode the margin structure that has defined the category.
Third-order effects
- If free clients plus paid services becomes the template, productivity software migrates from a boxed-license business to a services-and-hosting business, which is precisely the terrain both I.B.M. and Microsoft were staking out in their 2007 cloud announcements.
The trend: Office productivity software is splitting off from per-license desktop revenue toward free front-end clients funded by collaboration services and cloud delivery, with I.B.M. and Microsoft attacking each other's home turf from opposite directions.