Making Sense of Microsoft's Office Live Strategy

On Monday, Microsoft announced it's subdividing its online applications services even further, doling out new features such as storage space for individual Office users, while at the same time offering new e-mail and collaboration hosting features to small businesses. Today, it added some new personal attention services for the small business tier. Could this finally be the strategy that makes Microsoft's lagging online services segment start paying off?

In many of the classic Chuck Jones cartoons, the hero is being chased by one of his over-the-top villains. The action gets so fast that you only see a gust of wind and footprints the hero left behind. Then when he gets to some obstacle, like a boulder in the road or a sign pointing two directions, the footprints split into separate directions, leaving the pursuer comically perplexed.

Microsoft has historically had the resources and the wherewithal to assess the market in front of it, and when it appears to diverge in two (or more) directions, split off in all those directions at once. Its new strategy with Web-driven applications such as Office Live appears to do exactly that, leaving Microsoft footprints everywhere in its wake.

Office Live services product manager Jacob Jaffe calls this process "identifying centers of gravity." Crediting customers with spelling out the strategy on the company's behalf - a tactic which has the simultaneous benefits of bestowing thanks and distributing blame when necessary - Jaffe told BetaNews there's really no way to funnel the market for online applications into a definable niche. Not that Microsoft's ever done that anyway, or even tried to.

"What our offerings really represent is the fact that there isn't a one-size-fits-all," said Jaffe. "We very much designed the solution to enable people to pick-and-choose what's going to be right for them. So we don't see it as, small business customers are only going to use these kinds of services, or consumers are only going to use that kind of service. The broad point is, whether it's client software, server software, or services, we're going to enable our customers to pick and choose what works best for them."

"Which way did he go, George?"

Once again, Microsoft is covering the gamut. But it's important to note that product manager Jaffe hails from the conventional software division of the company - officially, he manages the Office brand, which it previously sought to distinguish from the Office Live brand, even in interviews with us.

This time around, the company appears to have encountered a boulder in the road and is splitting four ways: A customer can choose the conventional approach where software is installed on the client, the Web-driven approach where software is driven from Microsoft's servers and the client borrows or leases its storage space, the long-distance server/client approach where all of Microsoft's professional services are leased from the software provider and the customer provides only the clients, or the conventional server-driven approach where the customer purchases Microsoft's server software and drives all services - including applications - from its own resources.

The third tier in that list is Microsoft's newest, and for lack of any further words in the dictionary available for annexing, it's calling the concept "Microsoft Online" - for now, and a little tentatively at that. Here, services such as Exchange e-mail and SharePoint collaboration are leased in monthly service packages like a public utility or other (dare I say it?) commodity, rather than sold as server software. Of course, that latter option remains available, since Microsoft remains committed to running a full-service operation.

Jaffe described the Online tier thus: "For organizations, giving choice to IT pros to enable them to make a decision whether they want to host servers or capabilities themselves, whether they would like through hosted service offerings to have a partner host it, or now through Online services from Microsoft, whether they want Microsoft to serve that role...The choice is to decide, how do you want to deploy your software and manage the needs of your organization?"

On the opposite end of the scale, Microsoft has made the decision to blend Office Live Services more with Office - rather than distinguish them, which was the original plan - by giving conventional Office 2007 users access to portable storage space on Microsoft's servers. This is the Office Live Workspace option, and as Jaffe told us, it actually upgrades the Office suite in a few key respects.

"Imagine being able to save a Word document up to an Office Live Workspace, and invite people simply by entering their e-mail addresses, to collaborate with you on that document. As an example, if you invite me to collaborate with you on a document, even if I don't have Office installed, I can still view that document in the way that you've intended it to be viewed. I can even comment on that document."

The "in" term for the storage device someplace on the Internet where one's Office Live Workspace physically exists is "the cloud" - which, from the perspective of a practical paranoid like myself, doesn't always fill me with confidence. But it does seem to ring a bell with new customers who like the idea, or at least the flavor of the idea, of leveraging all that unknown and inexplicable Internet power out there somewhere, to do some good on the personal level.

Through an add-in integrated with the Office 2007 suite, an Office Live Workspace user can save documents via the usual Save command to a new default location - not "My Documents" but a personally named parcel of the "cloud." As Jaffe told us, users of older editions clear back to Office XP can download a new toolbar that offers the same saving features, only with new buttons. And Office Live will give users similar access from any Windows machine with a browser.

Is Microsoft ready for people?

The company's existing Office Live services which first entered testing in March of last year, will be redirected toward a class of customer which Microsoft has curiously concluded a) is an independent business with a handful of employees looking for information services a la carte; b) is not dependent on the Office suite.

"We will continue to offer what you've formerly known as Office Live Services for small businesses, under the new umbrella of Office Live Small Business," Jacob Jaffe spelled out for us.

In order for Microsoft to broaden the appeal of this middle segment, it's aiming to keep that segment active - not with new software features and bullet points, which are getting harder and harder to concoct over time, but instead with new social and interactive aspects. For instance, this morning the company announced an alliance with a search engine optimization firm called The Search Agency, which will be providing training and SEO assistance in varying degrees - from pre-arranged courses to full-service direct support - for Office Live Small Business customers.

This might be a new and untried approach from Microsoft: using partners outside the software realm to populate its services with features provided directly by human beings. This will also create variable, and often negotiable, prices, which is also unfamiliar territory for a company that's more accustomed to a cafeteria-style approach to multiple "offerings."

Microsoft's original intention in leveraging its Office brand for online services was to take advantage of businesses' reliance upon that brand - willingly or otherwise - as their provider of information on the desktop, to give customers the impression they should perhaps forge a similar reliance for other purposes. Leveraging its strength in one department to build new departments is what Microsoft does; some would argue that's all it does, though they could not possibly argue that it hasn't done that very well.

But in this case, the strategy was not as successful as the company may have hoped. So it is being changed to one that treats different customers in different ways, but which relies upon those customers' willingness to target themselves, or herd themselves into the proper chutes, if you will - as Jaffe puts it, enabling them to make the decision. Imagine General Electric, which is in the business of building both toasters and aircraft engines, producing an ad which effectively says, "We build stuff, and it'll be up to you to decide whether you want to buy a toaster or a jet engine." If you think that sounds absurd, watch any Sunday morning TV talk show, and you'll find GE does just that - quite successfully.

It's one way of distributing Microsoft's footprint throughout the entire field of business. But while you can make fun of it a little bit, you can't deny it ends up making a lot of footprints.