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In Context: Time for Shareholders & Employees to Demand that Companies Dump MS Office?

Sep 08, 2000, 08:57 (58 Talkback[s])
(Other stories by John Wolley)

MS Office costs businesses about $6 billion each year; with free alternatives like StarOffice that are now available, continuing to pay for MS Office constitutes fiscal irresponsibility -- shareholders and employees should be demanding an end to this colossal waste of corporate funds.

by John Wolley, Linux Today

Seems like some philosopher once said, "all change is painful." Individuals and organizations regard any change as carrying a significant cost, and that cost must be offset by the benefits of making the change, or else there's no point in doing it -- in the words of a less philosophical observer: "If it ain't broke, don't fix it!" With software, the cost for a business is retraining users and support people on the new software, plus the cost of lost productivity while people are getting up to speed (and if the new software is from Microsoft, there's often a significant additional cost of purchasing new hardware, or paying twice for the licensing, but that's a whole other story).

Individuals and organizations are going to resist changing over from the proprietary software they're using to open source software until they can see that the payback (in cost savings and/or functionality) is really big -- clearly big enough to make the pain of the change worthwhile. How close is open source software to meeting that criterion?

Different people tend to have drastically different opinions on this issue. But the opinions that ultimately count are those of the IT managers in large corporations who determine what software those organizations will use -- whatever is adopted for corporate use tends to be adopted by corporate employees for home use, for obvious reasons. So how can those decision makers be influenced? What's a really compelling argument for these folks?

Influencing Corporations to Choose Open Source Sooner
Most large corporations are already using open source software -- notably Linux, Samba, Apache, Perl, Python -- in selected niches. The selected niches tend to be "low end" web/file/print server apps and, at the other extreme, supercomputer clusters. It's a safe bet that all these businesses are watching open source software's rapid evolution and evaluating broader uses for it. And it seems likely that eventually these folks will see the benefits of changing over to open source as being worth the pain for most, if not all, of the software they use -- eventually.

The problem is that IT managers tend to be a fairly conservative lot when it comes to changing the software environment that they have to support. As a number of articles that have been posted on Linux Today have noted, the "free" as in "free beer" aspect of open source software is not very important to corporate IT managers. IT managers will choose open source for other reasons, such as the ability to customize it to suit specific needs, and the ability to get bugs and security holes fixed quickly, and (as it evolves ever more rapidly with major assists from IBM, SGI, and quite literally it seems, "everybody but Microsoft") its eventual all-around superiority.

But there are two constituencies for whom the "free beer" aspect -- the savings in licensing costs alone -- could be just important enough to cause them to clamor for a more rapid changeover to open source. Those are the corporation's shareholders and the corporation's employees. How's that?

Let's focus on Microsoft Office. MS realizes about $6 billion per year from Office licensing, most of it paid by corporations. A quick search of the Linux Today archives failed to turn up specifics on pricing for Office, but I suspect it works out to somewhere between $50 and $100 per seat per year. For a corporation with 10,000 employees, that works out to $500,000 to $1,000,000 per year of money that would otherwise would go into the company's bottom line.

Do Shareholders Have Enough Incentive?
Shareholders -- people who own stock in a company -- are critically concerned with the company's net revenues. In the long run the value of the stock that a person owns is directly related to the company's net revenues; in the short run, it's related more to expectations of how the company's net revenues will change in the future. Other things equal, the shareholder's stock is definitely worth more if the company can use a free alternative to MS Office instead of paying that $50-100 per employee per year to Microsoft.

How much more would a particular stock be worth if the company dumped MS Office? That depends entirely on the relative size of the company's net revenues vs. that expenditure for MS Office licensing. To keep the calculations real simple, let's assume a company has 10,000 employees and pays $1,000,000 per year for them all to use MS Office (assuming $100 per seat, for simple calculations again).

If the company has $1 billion in net revenues, saving the MS Office licensing would increase its bottom line by only 0.1% -- not enough to matter in the stock price. But if the company's net revenues are $100 million, saving the MS Office licensing would increase its bottom line by a full 1% -- and that is enough to affect the stock price significantly.

What About Employees?
To the extent that employees have a vested interest in seeing the company's net revenues expand, their concern with the company's bottom line is similar to that of the shareholders. The employee's relation to the MS Office licensing fee is perhaps more direct: that $50-100 could have been added onto an annual bonus, devoted to expanded benefits, or used to finance an employee gym, among other possibilities.

And then a lot of employees these days are shareholders in the companies they work for, either through stock options or employee stock purchase plans. People in this position share the shareholder's concern with the company's bottom line.

Why Single Out MS Office?
If either shareholders or employees are concerned enough about the company's net revenues to want to take some kind of action to influence the company's software choices, MS Office is the logical target to go after. Why?

  • The size of the licensing fees represent substantial potential savings.
  • Suitable free alternatives are available, right now, no waiting.
  • The changeover involves minimal pain for the gain; they can keep Windows (for now).

What's the Logical Open Source Replacement?
Right now, today, StarOffice is probably the best candidate to push. Why? It runs on Windows, as a local app or off a file server, so companies can run it exactly like they've been running MS Office. If it's run off a server, users will just have to wait a little longer for the approximately 13MB single executable to download, vs. the much smaller component binaries for Excel, Word, and PowerPoint.

Six to twelve months from now, all bets are off. ThinkFree Office's lean Java applets may run circles around both StarOffice and MS Office modules, and its menu structure is more similar to MS Office than StarOffice's is. Corel could conceivably open source its WordPerfect Office. And Applix would be a very strong contender if Applixware were ported to Windows.

Any Gotcha's Here?
None of the free alternatives can match MS Office feature for feature. A lot of users wouldn't consider this necessarily a bad thing -- in a positive light, it's a "reduction in bloat" -- but some users would miss some of the features some of the time.

One of the major features that, as far as I've been able to determine, the free alternatives can't match is MS Office's (nearly) "infinite extensibility" -- the ability to completely redefine the menus and toolbars, both by rearranging stock components and by adding custom macros. I've seen MS Word in a corporate setting where I couldn't recognize it -- the menu options consisted mostly of custom data forms specific to that company and they connected through macros (now Visual Basic for Apps) to MS Exchange. This type of customization of MS Office, especially where they've taken advantage of Microsoft's notorious "tight integration" across products, would boost the cost of a changeover to an open source alternative to the point where it would probably be prohibitive.

The saving grace? The open source alternatives are getting better and better at reading and writing the MS Office file formats, so a legacy "island" of MS Office customizations here and there in a company could probably coexist with the MS Office replacement everywhere else.

The Bottom Line
When I first heard that Sun was releasing StarOffice for free, I checked it out to see how well it compared with MS Office. I had a hard time finding the commands that I was familiar in MS Office and the online help was no help at all. And I didn't like the single 13MB executable, with all types of documents being opened within the single application window. But the basic functionality was all there and I was able to read and write MS Office files without any problems. A number of co-workers tried it out with similar results; only the PowerPoint presentations seemed to routinely need some manual touch-up when the files went back and forth with MS Office.

That was a year ago. An acceptable free alternative to MS Office has been available for a year now and the source code is being released under the GPL in October. How much longer will the shareholders and employees of the corporations that pay $6 billion per year to license MS Office tolerate this colossal waste of corporate funds? Would it be tolerated at all if the waste were more obvious, say they took the money out and burned it in the corporate parking lot? And since this is an election year in the US, how much longer will voters tolerate the waste of government funds on MS Office?

If an organization dumps MS Office, slipping Linux under that open source office suite becomes a whole lot easier.


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