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Facing increased competition and negative perceptions -- yet still optimistic and ready to fight for its home turf on the desktop -- Microsoft (Nasdaq: MSFT) made its new Office 2003 available to retail 
customers.
Microsoft said the new Office "system" -- consisting of six suites, 11 products, four servers, one service and "Solution Accelerators" -- will deliver productivity gains that will help the new software pay for itself in an average of eight months.
"The new Office System is a major leap forward for information workers," Microsoft chairman Bill Gates said in a statement. "It makes information work more productive -- and more profitable -- by offering innovative new ways to communicate, to find and share information, and to manage complex projects."
Industry observers agreed Microsoft is delivering a more advanced, integrated system of productivity applications and platform, but also referred to the dramatically different environment that Microsoft now faces.
"The market is definitely different because Microsoft is under siege," Yankee Group senior analyst Laura DiDio told TechNewsWorld. "They have competition."
Office Connections
Microsoft, which made Office 2003 available to manufacturers in August, cited several business customers -- Siemens AG, HP (NYSE: HPQ), Guidant and others -- which had used the software to make productivity gains.
Office 2003 consists of the latest versions of traditional Office programs -- such as Word, Excel, Outlook and PowerPoint -- and adds new tools, such as a note-taking application called OneNote and an XML data tool called InfoPath.
The Office 2003 release also represents a new upgrade strategy for Microsoft, which is tying together its Office applications and Windows operating system and servers, including Exchange Server 2003 for e-mail and the new Office Live Communications Server 2003.
Melding and Marketing
Yankee Group senior analyst Dana Gardner told TechNewsWorld that Office 2003 represents a transformation of desktop software from a series of separate applications to a melding of client-server and network technologies that use standards such as XML and common Internet protocols.
Office 2003 does represent a step forward for Microsoft, but not as big of a step as the company claims, Meta Group vice president Steve Kleynhans told TechNewsWorld.
Calling Office 2003 more of a marketing ploy, Kleynhans indicated the various pieces of Office 2003 are not yet coming together as he expects they will in Microsoft's next operating system, known as Longhorn, due in two to three years.
Open-Source Poison
Part of the reason for Microsoft's increased effort to weave servers into its new desktop software system is the growing competition from Linux software and open-source productivity suites such as OpenOffice, according to DiDio.
DiDio also said security breaches and negative perceptions surrounding Microsoft -- which have festered since the company's fouled Licensing 6.0 plan and antitrust settlement -- have evolved to the point of impacting IT purchasing decisions.
"That atmosphere out there has been poisonous to Microsoft and has been fertile ground for the open-source community," she said. "Suddenly someone is challenging them on the desktop, on their home turf -- this is uncharted territory for them."
Stemming the Flow
DiDio, who referred to open-source assaults on Novell and Sun as well, said Microsoft is taking steps to win back confidence and trust in customers. The company's outreach efforts include extending warranties from 90 days to a year, lowering the threshold for volume licensing discounts and solid indemnification, she said.
"They're really walking the road to redemption," she added. "Microsoft wants to make sure the trickling to Linux doesn't turn into a flood in 2004 or 2005."
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