Office SpaceOffice Space

Everyone loves a good dogpile. And this week, the poor sap at the bottom of the pile happens to be Microsoft Office.

The very thought of Microsoft's longest-running mega-hit falling on hard times is more than a little weird: Since Office evicted WordPerfect from the business-software pinnacle nearly two decades ago, it has generated more pure profit than any application ever created. Yet since Microsoft lost a high-profile standards battle with the Commonwealth of Massachusetts last week, you'd think the Office team was just another bloated, overpriced software package, padding its absurdly high margins with forced upgrades and features no one realized they needed.

While I can buy the part about Office being bloated, overpriced, and driven entirely by marketing hype rather than actual user needs, it's hard to envision it as "just another example" of anything. In fact, in the (admittedly brief) history of the software industry, Office stands alone.

Plenty of products claim to compete against Office; judging from the PR material they generate, you'd think they were breathing straight down the back of Microsoft's fat, sweaty, soon-to-be has-been neck. To divine the truth, however, you only need to know one thing: Office still generates margins in the neighborhood of 80 percent. If this is what "competition" gets us, I'd love to see what the numbers would look like if Redmond wasn't trapped in this free-market pressure cooker.

Nevertheless, for the first time in two decades, it is possible to imagine (without the aid of a concussion or psychedelic drugs), a situation where Office might be vulnerable. The impending Office 12 update is, by most accounts, a fairly radical departure from the existing version's look and feel; many users will, at least for a time, find themselves wishing they were using a product with a more familiar interface. At the same time, the beating Microsoft took in Beantown is likely to give other organizations, both in the public and private sectors, an opportunity to look more closely at competing products. Although it's hard to tell yet whether the media buzz surrounding the move to the OpenDoc format is anything more than a collective hallucination, more than a few market-watchers agree that Microsoft did, indeed, blunder badly when it refused to support ODF -- a move that would have made the entire controversy moot, in a single stroke.

Whether or not Office has one foot in the grave, there are already plenty of vultures sizing up a potential meal: Sun's PR execs, for example, practically fell over one another trying to point out that the company's StarOffice suite worked quite nicely with ODF, thank you very much. And as luck would have it, Sun just released StarOffice 8 to generally positive reviews, while open-source sibling OpenOffice.org is currently taking its first major upgrade through final pre-release paces.

Finally, there's the icing on the cake: Google's just-announced alliance with Sun, which includes a yet-to-be-detailed endorsement of StarOffice. If this is a carefully scripted chapter in Google's super secret plan to smash Microsoft out of existence, then we may as well turn over the planet to these people right now -- resistance, as the man says, is futile.

It's far more likely, of course, that we're watching Fortune serve up precisely the dish Microsoft ordered this time around: a potent mix of bad luck, bad timing, bad decisions, and (rumor has it) bad karma.

Either way, it's up to Google to make the most of its opportunity, "endorsing" StarOffice, and OpenOffice, and every other Not-Office office suite willing to accept a bottomless expense account and the kind of marketing you'd have to leave the planet to escape. The reason why is obvious: For years, Microsoft reveled in those high double-digit margins from its sales of Office, to the point of becoming utterly dependent upon them.

Now the worm has turned: If a price war cuts those margins to, say, a pathetic 40 or 50 percent, it would still gut Microsoft's profits -- and in all likelihood, ignite a bloodbath in the equity markets.

So here we are, watching Office deal with its first real period of weakness in many years; competitors for which "free" is an everyday price are circling hungrily; and Google standing by, ready to pour its own special brand of gasoline on this smoldering pile of embers.

I don't know about any of you, but I'm not going anywhere until I see how this turns out.