Office Trial Causes Channel Conflict

Microsoft's Office Trial conversion program is so successful, the company now clearly competes with its retail and dealer partners.
The signs were there in February, when we said the Office Trial program "could" cause channel conflict. There's no more "could" about it.

Microsoft now has 9 percent dollar share for the U.S. retail productivity suite market, according to NPD. Chris Swenson, NPD's director of software industry analysis, largely attributed Microsoft's market share gains to Office Trial conversions.

Microsoft offers the trials through a number of venues, including direct from the Web or on new PCs. Microsoft also directly fulfills Office conversions. Users can purchase activation codes directly from Microsoft via the Web.

Microsoft has historically avoided selling against its channel. The company has no direct sales force and is hugely dependent on resellers, retailers and solution providers to hawk products like Office or Windows. But the Office Trials and newer programs like Windows Anytime Upgrade put Microsoft in competition with retail partners.

Granted, 9 percent of U.S. retail productivity suite sales is a paltry number considering the bulk of Microsoft software sales touch the channel. Still, some of the touch is forced. From one perspective, Microsoft's volume-licensing programs are direct with business customers. Microsoft includes the channel in the deals, but does it really have to? Seems to me that cutting the channel into volume-licensing deals is more a way of soothing potential conflict.

I don't mean to suggest that Microsoft is going into direct sales. The company continues to be quite committed to its partners. The Trial conversions more likely capture sales otherwise missed. That said, partners could ask why they aren't included more in the Trial conversions.

Overall, Office 2007 continues to sell well, particularly compared to its predecessor. For the first six months of 2007, Office U.S. retail sales increased 59.6 percent, as measured in dollars, and 58.1 percent in units, according to NPD. "Unit shipments increased for every existing version of Office," Swenson said.

More broadly, Office has commanding presence at retail, with 96.8 percent dollar share, according to NPD. While there has been lots of talk about Office 2.0, or Productivity Suite 2.0, there's no sign of change coming at retail.

"We haven't seen any kind of impact from the software as a service vendors"—like Google, Swenson said.

Maybe Office's continued, undaunted success should comfort partners stung by that 9 percent figure. A little competition from Microsoft is better than a whole lot of competition from Google.

source: microsoft-watch.com

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