Web-based productivity apps - 1

Recently there has been an explosion of activity around web-based productivity applications - Google has developed Google spreadsheets and purchased Writely; Sun and OpenOffice have demonstrated the future of office applications in XML; and start-up Zoho has developed a complete online set of applications, from project management to presentations.

Of course, this is Microsoft's natural territory - it has dominated productivity applications for more than ten years now, earning $8bn dollars profit from MS Office during 2006 alone. But will it cannibalize this business by producing a free online version? I suspect it seeks to enhance functionality in its existing Office suite, lock people into Sharepoint, and slash prices to offset gradual decline.

This area is mature, the applications are nowadays technically straightforward, and there are only three reasons why Microsoft is able to earn so much in one year:

• File format lock-in - everyone else uses MS Office, so to open their files you need to use MS Office too (but the new "open" XML formats in MS Office 2007 will negate this reason).
• Functionality - MS Office is still the tool to beat for stability, look and feel, and functionality (but it wouldn't take an enormous effort nowadays for a deep-pocketed competitor to overcome this).
• Inertia - staff everywhere would need expensive re-training to move from MS Office (but they are getting more familiar with look and feel for internet applications)
• As you can see, the barriers to entry in this space are falling quickly, and Microsoft's competitors are likely to thrive in the next few years.

In future, the productivity suite will be divided into two markets, broken down by the 80/20 rule.

• Browser-based: 80% of people will use browser-based tools. These will be supported via adverts on the internet, or (for the enterprise) by sales of specialist intranet servers that address privacy issues. Although these will not have full functionality, they will be good enough for most people and will also support collaborative and sharing features.
• Client-based: 20% of people will use advanced client applications, rather than the browser. These are the 'Power Users' who require extra functionality, based on the OpenOffice or OpenDocument XML standards.

The advantages of browser-based applications are many:

• Collaboration and sharing through internet technologies like RSS / Atom, VOIP, social networks / project homepages, chat & discussions, search, wikis, etc.
• No client downloads required, and users understand the browser interface
• Development is made easier by taking advantage of tried and tested technologies like URIs, HTML, Javascript, CSS etc; and upgrading the suite is as simple as upgrading the website.

From this analysis, the real competitor to MS Office is not OpenOffice, but HTML-based browser applications, which could take most of the market share. It's pretty ironic that, despite Microsoft not adding any new technologies to Internet Explorer for 6 years, it still has enough functionality to decimate their Office business! Client applications will have to run fast to stay ahead of browser development in the next few years.

But which productivity applications will thrive in the browser? See my next post for details!