OK, here’s a question for you. What is the existential threat facing Microsoft today? Did you say in operating systems? iOS? Android?

Unfortunately, the number crunchers would say: wrong on both counts. Just in terms of raw numbers, Windows is not, repeat, not Microsoft’s biggest revenue driver.

That honor falls to Microsoft’s Office productivity suite. This segment generated roughly $23 billion in 2011 in contrast to $17 billion flowing in from all versions of the Windows OS.

Microsoft owns 95% of the productivity software market also, in contrast to 75% of the desktop OS market. The office division is also expected to bring in $26 billion in 2016.

Therefore any threat to Microsoft’s dominance in productivity applications is the real existential threat. The question therefore is whether such a threat exists and how potent it is.

There are actually two very different, but very potent threats to Microsoft’s dominance – Google Docs/Apps and Open Office.

Forbes writes about this competition;

We believe that free productivity suites like Google Docs and Open Office are providing an alternative to users who don’t need the full power of the Microsoft Office suite. We think that downsides to Microsoft’s forecast on the Office suite front are possible especially if a new entrant comes in and provides a better solution for enterprises.

But we think that the likelihood of this is low since the Office suite is far ahead of the competition in terms of capabilities and has a sticky user base as users are reluctant to shift to new platforms.

Is this true though? How well is Microsoft insulated from competition from these two products?

Open Office’s market share is tough to estimate, but a study of 200,000 Internet users by a web analytics service in 2010, showed various adoption rates worldwide: 0.2% in China, 9% in the US and the UK and over 20% in Poland, the Czech Republic, and Germany.

Large-scale users of OpenOffice include Singapore’s Ministry of Defense and Banco de Brasil. In France, local and national government use it as well as the French Gendarmerie. Government organizations in India, such as ESIC, IIT Bombay, National Bank for Agriculture and Rural Development, the Supreme Court of India completely rely on OpenOffice for their administration.

Open Office comes at a great price – free. With a reported 30 million downloads for the Apache OpenOffice 3.4 series by January 2013, OpenOffice could pose a threat to Microsoft, especially on tablets.

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  • Arnold

    All anyone has to do, especially people who write articles like these is actually use the sub par software like OpenOffice and Google Docs, use them and use Office 2013 and then understand that there is no threat whatsoever to Microsoft Office.

  • Bay

    And after using them Arnold, you can pay thousands of dollars for Office over several years – or millions if you are a large organization – and then realize that there are free alternatives that work almost as well. After all, most users use 10-20% of Word or Excel’s capabilities.

    Sometimes “good enough” (vs perfect) is OK for poor people or poor companies as the millions using Open Office and Google Apps will tell you.

    • Arnold

      I agree on the licensing, one day Microsoft has to do something to bring the cost down. However as we all know, try teaching a user who refuses to learn something besides Excel how to use something else.

      When she starts complaining and sending emails to her boss and her bosses boss how IT is impeding her from doing her work, then good ol Excel is back in Business.

  • Arnold

    I do agree on the licensing, one day Microsoft has to bring that cost down. But organizations still shell out the money because as we all know, Try teaching a user who refuses to learn something besides Microsoft excel how to adapt to something else.

    When they start sending emails to their boss and then their bosse’s boss that IT is impeding her from getting her work done. Then good ol Excel is back in business.

  • Bay

    I certainly agree with you that the free alternatives may not be right for everyone. But Arnold, think about millions of small businesses who don’t need the heavy lifting and individuals who only occasionally use Word or Excel (especially in BRICs and the Third World).

    That alone explains why Office 365 was rolled out hastily – to counter a vastly improved Google Apps. That volume is significant and those countries are where the growth is.

    Take a look at this page showing adopters of Google Apps. (http://bit.ly/npaz2y) Yes, I know it’s a typical “best foot forward” page, but many of these customers are not minnows – Air Products, Heinz, tons of universities, News International, The Telegraph and so on.

    Its just important that Microsoft does not approach this with the same complacency that lost them smartphones and tablets and Search … you get the point.

    And that’s my point – this is the most profitable “pillar” for Microsoft – don’t underestimate the competition.

    • Arnold

      I do see the point and agree those markets should get targeted. Microsoft would do well looking for their own freelight version of office. They already have office web apps that blows google docs out of the water,