Filed under: Products and services, Google (GOOG), Microsoft (MSFT), Dell (DELL), Circuit City Stores (CC)
Microsoft (NASDAQ: MSFT) wants to expand the reach of its vital Office suite of products. The software giant wants to utilize a subscription model for the collection of programs. The initiative will commence later this month at Circuit City (NYSE: CC) and it will eventually reach other retail stores. People will also eventually have the option of accessing the subscription product via computers such as ones made by Dell (NASDAQ: DELL). The cost is reported to be $70 for twelve months of Office access.
This is an interesting scheme. As the article points out, businesses might not bat an eye at subscribing to software applications, but for consumers, this is a different ballgame. Many of us, myself included, are so used to going down to a Ideal Purchase (NYSE: BBY) to buy a software package for a flat fee that paying yearly dues just seems like an alien concept. And I’d say this goes double for something as huge and complex as the Office program. Microsoft believes that $70 on an annual basis will be perceived as cheap and will expose consumers who might normally either seek upgrades on a pirated basis or who would simply continue using older versions to regular approved updates. It is a large investment, after all, to upgrade to a new iteration of Office.
Microsoft would be wise to market the heck out of the subscription model for Office, taking full advantage of the inflationary environment we are currently in. If potential users can be convinced of the value proposition, then they could eventually become hooked on the promise of upgrades over time for the relatively economical price indicated. Checking around on the net, I notice that a lot of the negative comments about this idea center on the fact that there are already free alternatives out there to Office, such as applications offered by Google (NASDAQ: GOOG).
The thing is, though, many mainstream users of software applications probably are susceptible to the brand equity of Microsoft and Office. I am. Quite honestly, I’d rather use something used by the majority of people I know and work with as opposed to a free suite on Google or elsewhere. Sure, savvy software users will make fun of me for holding such an thought and will point out a perceived lack of sophistication on my part, but my point is that, from a business standpoint, Microsoft does have a ton of equity to leverage in the form of the Office name, and it’s a worthwhile goal to invest a little capital toward converting some of the mindshare out there who don’t currently engage Office upgrades into subscribing users. Incremental revenues may result over time if an effective marketing campaign is drawn up. I don’t think I’d subscribe, but I’ve a feeling others might…
Disclosure: I don’t own any company mentioned; positions can change at any time.
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