Office Apps Get An Ambitious OverhaulOffice Apps Get An Ambitious Overhaul

Microsoft's Office applications package, introduced in 1989, already is a major force in the software industry, with 400 million users in 175 countries, more than 90% market share, and sales of about $10 billion annually. This week, Microsoft will unveil the next iteration of that successful product with a goal that aims even higher: The new Office System could support a $117 billion market of related services within three years, Microsoft says.

Chief software architect Bill Gates and group VP Jeff Raikes will be on hand Tuesday when Microsoft formally introduces Office 2003 and related applications in New York. "Our goal is ambitious: to improve personal, team, and organizational productivity by addressing a broad array of business processes," Raikes wrote in a letter distributed last week to several hundred thousand customers. Microsoft's new applications could unleash "a new wave of productivity and creativity," Raikes said.

To get all that, though, will require more planning and effort than in the past. Some of Office 2003's most interesting capabilities--collaboration made possible by Windows SharePoint Services, for example, and new Information Rights Management controls--depend on server software that may need to be upgraded, too. "There's a lot of new stuff in Office 2003," says Rob Helm, director of research at Directions on Microsoft, a research and analysis company. "It's a question of getting it hooked up to the right things in your organization so you can get value out of it."

Office 2003's professional edition includes the staples of the past--Access, Excel, PowerPoint, Outlook, and Word--plus a jolt of new features and one entirely new application. Among the highlights are support for XML schemas, digital-rights management, and collaboration via SharePoint Services. The new application, called InfoPath 2003, makes it possible to create business documents using XML-formatted data. In addition, Microsoft's E-mail client, Outlook, gets a makeover that includes a new interface and better remote connectivity.

Coinciding with the retail release of Office 2003, which has been available to businesses with enterprise licensing agreements since Sept. 15, Microsoft this week will disclose the availability of Exchange 2003, the latest version of its messaging server, and other desktop and server software (see chart).

In addition, there will be a big push from other software and services companies with products that augment the Office System. Microsoft estimates that the ecosystem of Office-related integration, consulting, and other services could swell to $117 billion by 2006. Microsoft plans to jump-start that by spending $500 million to get independent software vendors, systems integrators, and other partners equipped with the appropriate development tools and training. The push includes Office Solution Accelerators, which are templates for building customer-specific applications and a directory of Office System-based products for customers.

The XML support in Office 2003 already is being used to create innovative product-service combinations. Earlier this month, Amazon.com Inc. disclosed plans to use Web services to let users access its Web site from within an Office application.

Microsoft no longer refers to Office as a suite. Instead, it's a "system." That suggests an added level of complexity, which analysts say will cause some businesses to proceed more slowly with upgrades. Says Victor Raisys, a financial analyst with SoundView Technology Group, which holds Microsoft stock: "I would expect to see a fairly slow ramp up."