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Microsoft Office sales down, but don’t blame Google Docs?

NPD reports today that Microsoft Office 2010 sales are much lower than its initial release of Office 2007 and only slightly improved over its Office sales earlier this year.

NPD gives a few reasons for the lackluster consumer launch, which began just two weeks ago.

  • Office 2007 was launched alongside Vista
  • The Office Suite market is saturated
  • Office 2010 was launched during a seasonally slow period for PC purchases [I’d add Intel just announced record earnings and IDC just announced strong PC growth]
  • Office 2007 was a radical new design, 2010 not so much

I’d add that low-priced netbooks, which were just becoming popular in 2007, are now much more prevalent in the market today.  Most netbooks do not come with Microsoft (MSFT) Office pre-installed to keep prices below the $300 mark.  Open source alternative Open Office is often found on these machines.

Google Docs?

NPD states that the free online alternatives to Office, like Google’s (GOOG) Docs, are playing little to no role in the slowed adoption of  Microsoft Office 2010.

While products like Google Docs are certainly playing a part in the overall productivity software ecosystem, it is a virtual certainty that the slower than expected initial sales of Office 2010 have nothing to do with free alternatives, be they Google Docs or Office 2010’s own online version. These products have little awareness among the mainstream consumer who is the retail boxed version’s primary customer.

I wouldn’t discount the Google Docs offering entirely, however.  Students, who traditionally make up a large part of Microsoft’s Office installed base, are turning to online offerings much more, especially as their schools “go Google” in huge numbers.

Michael Cohn from Google Apps integrator Cloud Sherpas says,

The last time Google publicly reported numbers, they claimed 20 million users on Google Apps (which includes the Docs suite).  My bet is that this number is closer to 30 million by now.  There is no doubt that Google Apps has forced Microsoft into the Cloud and to drop their price on software.

NPD says, “Mainstream consumers have not embraced the concept of the cloud.”  We see the exact opposite in the market.  Google Apps is the defacto standard in K-12 and colleges at this point, and among businesses, we’re seeing firsthand tremendous growth in the mid-market (200-3000) and large enterprise (3000+).  In fact, where customers were drawn to Google Apps for messaging (Gmail) in 2009, we’re now seeing more and more businesses make the switch because there is a viable alternative to Office for a segment of their users, which allows them to reduce license costs with Microsoft.

Google also counts 2 million mostly small businesses who have gone Google.  Those workers are more likely to hesitate before updating to Office 2010 when they know most of that functionality exists for free, in the Cloud.

I also wouldn’t discount the breadth of online Office users overall.  For instance, Microsoft’s own Facebook Docs is available to its half a billion users.