Microsoft Office Live Workspace - Unfair Competition Redux?

I. Introduction

To get a perspective of the issue at hand, it makes sense to go into flashback mode and travel back to the dawn of the internet, if you will, to about 10 years or so. These are those ancient times when, believe it or not, Microsoft did not have a monopoly in areas where it is almost a generic leader now – namely, Internet Explorer in browsers (or IE, as we lovingly call it).

The Browser Wars

To achieve its top position, Microsoft didn’t really tread the path of the virtuous, as it would have us believe. The fight for the top position was dirty and lowdown, as it usually is when big business and huge stakes are involved.

Internet Explorer vs. Netscape - The Early Days

By the mid 1990s, internet usage had really exploded, and browsers were accepted as the best way to access this wondrous new world. Netscape Navigator was the number one browser, and Microsoft had just released its first browser, IE 1.0. The following years saw intense competition, each trying to outdo the other, and IE gradually ate into Netscape’s share.

Microsoft’s decisive strategy to encroach into Netscape’s dominance was to “bundle” its IE software for free with its Windows software, which dominated the Operating System (OS) marketplace with a 90% share. This was seen as an unfair trade practice by the authorities, and the historical USA v. Microsoft case ensued where it was established that Microsoft was in fact unfairly using its clout in the OS market. The trial ended in a settlement wherein Microsoft agreed to be more open. But it was too late for Netscape, and by 1999 it had lost its market to IE, and gradually dwindled away into obscurity.

A History Lesson

Microsoft was able to use its vast dominance in the OS market to covertly force consumers into using its IE browser. Since the product was prepackaged with its operating system, and competing products had to be downloaded, consumers were pre-inclined to use IE, and were virtually blinded to the existence of rival products, even when they were vastly better. Once the above mentioned suit was settled, one would think that history wouldn’t repeat itself. Think again.

The Present Day - Collaboration Wars?

Enough of history. Let’s fast forward to the present day. Although it may have missed the radar of most, Microsoft is up to its old tricks again. Recently, it has stealthily taken a step that may be likened to its actions during the browser war days.

The rules of the game have changed since those days though. With the advent of the Web 2.0 wave, the action has moved to platform independent, thin client web applications, and all companies are rushing towards the relatively untapped small and mid sized business (SMB) market.

Microsoft Live Workspace - The Controversy

Microsoft too has a product wedged in this market, namely Microsoft Live Workspace, which was launched rather belatedly in late 2007 as a beta release. Workspace is offered under the MS Office Live banner and is an online storage and collaboration service for MS Office documents and most other common file types. Its core functionality is that of an online document management system, but it offers other functionality such as shared contacts, tasks and calendars.

Traditionally, Microsoft has lagged behind in both the SMB and web application arenas, and Workspace wasn’t exactly ahead of its competition. Solutions like HyperOffice, Caspio, and Buzzsaw had dominated the SMB collaboration space because of many years of serving this domain. Not only did they offer a more comprehensive feature set besides online document management features, but they also provided for other SMB productivity/collaboration needs like business email, intranets/extranets, forums, access control, mobility, shared contacts/tasks/calendars, and so on.

Knowing that this was the segment where big battles would be fought in the future, Microsoft played its trump card – it silently rolled out an update bundling Office Live Workspace with all its MS Office products. Microsoft Office products like Word and Excel now have tabs that allow users to upload and download files to and from their free Workspace account from the desktop software itself. Reeks of history, doesn’t it?

II. What is the Workspace Controversy All About?

Microsoft - Software's Big Brother?

Microsoft’s strategy has always had Orwell’s Big Brother-esque overtones. No matter what domain, Microsoft’s presence always looms large. It has long ruled almost every PC on this planet with its Windows OS. Thanks to its dominance in the OS market, Microsoft controls the browser market with Windows bundled Internet Explorer (although lately, Firefox has been breathing down its neck because of superior functionality). Furthermore, Microsoft also controls the productivity suite market with MS Works (Microsoft’s rudimentary productivity software often bundled with Windows), and its more popular cousin MS Office, which is almost everybody’s default purchase because of its widespread use and compatibility with Windows. Is it then a wonder that word processing is almost automatically associated with .doc, spreadsheets with .xls, and presentations with .ppt?

Microsoft's Incursions Into the Online Collaboration Software Market

Ever since the IT war went online, Microsoft could never quite get a foothold in this market, except perhaps with Internet Explorer. Yahoo trumped it in online mail and instant messaging; Google trumped it in search and online advertising. It never even got close to Facebook and MySpace in social networking with Windows Live Spaces.

Although Microsoft has done well in enterprise-class collaboration and messaging software with SharePoint and Exchange, these products have not been suitable for small to mid sized businesses because of being expensive, difficult to implement, and having the peculiar problem of being a little “too powerful”, which is really wasted in an SMB context.

The heat has been on lately in the “online collaboration software” market, an approach that fits well with SMB needs and budgets. The competition in this market is robust with solutions like HyperOffice, WebOffice, Caspio, Zimbra, and Zoho. Microsoft’s entry in this market, Live Workspace, apart from the MS tag (and being free), wasn’t really anything special, so understandably uptake wasn’t too great, hence the decision to tie it in with MS Office – specifically allowing users to upload and download files to and from their Workspace account directly to and from their Office software.

What About the Little Guys?

This seemingly nonchalant update has the power to shake the online collaboration industry at its very roots. Microsoft Office holds an overwhelming 95% share of the office suite market, and is used extensively in almost every company. Now a couple of harmless looking tabs on the toolbar, which allow you to upload and download files directly from your Word, Excel, or PowerPoint document to your free online Workspace account, virtually guarantees that users will not go elsewhere for document collaboration services. In other words, with this simple change, Microsoft is using its dominance in the office suite market to sweep away all competition in the online collaboration market. Apart from hurting competition, it would ensure that consumers never look elsewhere to collaborate on documents, no matter how superior other products in the market may be.

The first thing out of place with this whole matter is that it gives Workspace such a tremendous advantage that smaller companies with lesser budgets just cannot compete. Microsoft knows the first bait to attract customers is a “free” tag. Offering this service for free is no big deal for Microsoft, as it can easily borrow from its massive revenue streams elsewhere. This is reminiscent of classic economics, where a monopolist sells below cost to completely push out competition.

Adding functionality to directly upload and download from a free Workspace account virtually blocks out competition from the consumer’s vision. There are many paid solutions that have a feature set much more extensive than Workspace. For example, HyperOffice has integrated email, an intranet/extranet publishing and customization feature, mobile access (very important and not available with Workspace), and instant messaging, amongst other things. But with the visibility factor and the free price tag, no one will even be looking.

How Customers are Impacted

Generally speaking, monopolies have never been considered good for the consumers. It ultimately results in sub-optimal products as would have otherwise been available if there were robust competition in the market. Secondly, with Workspace hogging all the mental space, consumers will never really get to have a fair look at other options, which in many cases are much better.

Furthermore, at this point when Workspace is in its beta stage, it might be risky for any company to commit to it because the exact pricing structure after a full release cannot be ascertained with certainty. Currently, Workspace has certain restrictions – a 1000 document limit and 500 MB storage limit. Future pricing could be storage related: free for basic features, and a price attached to premium features, for customer support, or for a multitude of other pricing methods. Recent comments have indicated that Microsoft would make revenue from ads – which would mean a cluttered interface that doesn’t go well for business purposes.

And lastly, with a free service, the first thing that suffers is customer service. Smaller companies have the advantage of knowing their customers well, and offering personalized human service and often free training and consultation as well. Customers can certainly forget about this with Live Workspace.

Conclusion (And a Proposed Solution)

Whether or not the current step will result in litigation as with the Browser Wars is yet to be seen. As always, the burden is on the wounded to make a noise. Whether any action is taken will largely depend on the awareness of the issue in the part of affected companies and customers, and the resulting furor.

And like all problems, this is pretty solvable. What’s more, history has it ready and served for us. The solution could follow the lines of the settlement reached in the Justice Department vs. Microsoft trial. Microsoft could open its platform, in this case MS Office, to competitors, so that there is an even playfield, and competitors have a fair chance of competing based on the product’s inherent worth. In other words, just as users can link directly to Workspace directly from Office software, similarly, competitors should also be able to embed direct linkage from MS Office to their collaborative solutions.

If something is not done to keep Microsoft in check, there’s no telling what they’re capable of doing. If not stopped, Microsoft could be capable of taking over the entire computer industry – or even the entire world.