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

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.