Office chief explores new windows of opportunity

Mature cyclical product, or one of the main catalysts for the next leg of growth at the world’s biggest software company?

To many, the Office suite of PC software applications has become a mundane part of working life. But to Jeff Raikes, head of Microsoft’s business software and server divisions, it is the starting point for a wave of software that will launch the company into new markets.

He has pushed this vision since taking over the division six years ago: Office as the front door through which “information workers” will one day access a far wider range of the tools needed to do their jobs, from tapping into the core business applications that support their companies’ operations to holding conference calls with colleagues over their computers.

Now with businesses that represent 58 per cent of Microsoft’s revenues reporting to him, Mr Raikes is in a position to try to prove that he can stitch together the software pieces to make it work.

It is a grand scheme that is still in its early stages. David Smith, an analyst at Gartner, says that using Office as a platform to support other businesses is a strategy that is only “just getting off the ground” at Microsoft, and is an idea that has brought mixed success in the past.

Also, some early moves have taken longer than expected to bear fruit. In business applications, a market where it is taking on SAP and Oracle, Microsoft has been slow to make a mark.

“We have learned some things,” concedes Mr Raikes. “I thought small and
medium-sized companies would probably change their [enterprise] software faster because of the internet than, perhaps, what they did.”

Despite that, analysts generally credit Microsoft with success in some parts of its vision, as well as in finding ways to refresh the basic Office software to continue to drive sales. The latest version, launched earlier this year, contributed to a 19 per cent jump in revenues from the business division in the most recent quarter, to $4.6bn.

The best indication that the wider Office vision is gaining ground has been the success of SharePoint, a piece of server software first launched in 2001 that is integrated with Office. SharePoint has been steadily expanded to include document management, enterprise portal, search and other functions needed to
let workers in the same company collaborate more
easily.

Mr Raikes compares the SharePoint strategy to the one behind Office itself: combining a set of tightly linked capabilities in one steadily expanding product. With 233 per cent growth over the past year, SharePoint has become one of Microsoft’s hottest new products for business customers.

Ultimate success, however, will depend on two things. One is whether Mr Raikes can sell a broader set of applications to run on the foundation of Office, SharePoint and Exchange, the company’s e-mail and messaging server. Along with business applications and business intelligence, this includes workplace communications – a market which the Microsoft executive predicts is about to go through upheaval.

Mr Raikes compares it to what happened in computing in the 1990s, when a vertically integrated industry moved to a horizontal structure based on standardised hardware and a new software platform.

Thanks to the enabling technology of IP, the communications market is ripe for a similar change, he says.

The other test for Mr Raikes will be whether he can manage the shift towards a new business and delivery model in the corporate software business, one that relies on internet-based delivery of services.

His response: for all the attention given to companies such as Google and Salesforce.com, the corporate software business is not about to be revolutionised overnight. “We’re probably moving a lot faster than people realise, and . . . the market isn’t moving as fast as some of the competitors would like to make people perceive,” he says.