Word remains the standard, though. Even these competitors use compatibility with Word and other Office apps as a selling point.
"Whether starting from scratch or making use of existing Microsoft Office ... you and your team can use IBM Docs to work together..." an IBM promotional video says.
Office 365, which includes packages ranging from online-only access to apps to both online and desktop versions plus other services, can match offers from a range of competitors. According to Microsoft, it is doing well; in less than two years it is a $1.5 billion business, and its subscriptions account for 25% of Office 2013 sales. "Office 365 not only allows access from anywhere, it guarantees Microsoft regular subscription income from customers," Silver says.
Microsoft is trying to drive business customers to its cloud offerings because they automatically provide the latest versions of the applications that customers might otherwise skip, says Karcher. "They say, that doesn't deliver us increasing business benefits,'" he says. The licensing costs of upgrading each time for Office vs the cost of Office 365 is about a wash, but the subscription model guarantees Microsoft a revenue stream.
"The idea is for customers to continually pay for access rather than make a decision three years in advance if they want to [deploy the new version in their own data centers and] get an upgrade with a discount," Karcher says.
Microsoft is trying to perpetuate the Word habit by offering low-cost and free versions of Office 365 to students. University students can get a four-year subscription for $80 and colleges that subscribe to Office 365 for faculty and staff get it for students, too, at no extra charge.
Word as bundled in Office continues its success, but is definitely being threatened, Silver says, especially as PC sales slip and tablets and phones become more popular computing devices. "The mobility wars will certainly shed light on what's going on," he says. "This includes whether and when Microsoft develops an iPad version of Office and whether that version supports the full range of features and functionality."
Microsoft has said it's delaying an Office for iPad version until it fully optimizes Office for its own Windows 8.1 touch-centric operating system, effectively forcing iPad customers who want to use Word on the devices to subscribe to Office Web Apps.
Meanwhile, Microsoft has to deal with plotting a future course for Word to add new features without upsetting customers who have grown comfortable with the app as it is. For example, in 2007, Microsoft changed the interface to make features easier to find, but long-time users complained things had changed and they couldn't find their favorite features in the new places, Silver says. "Word is the poster child for the innovator's dilemma," he says. "If Microsoft makes big changes to Word, it won't be the product customers know."
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