Staff Writer, CNET News.com
Convincing businesses to upgrade to new versions of Office is a perennial challenge for Microsoft, but the company hopes a new Elixir might speed things up.
An effort, code-named Project Elixir, will take shape later this year as a way to promote Microsoft's Outlook e-mail and contact program, with some additional fields, as a tool for viewing customer relationship data. Eventually, the plan could help the software giant elbow its way further into the customer relationship management market, where Siebel Systems, Oracle and SAP dominate.
Microsoft started doing this internally last year, using Outlook as a means for its sales force to access a data warehouse linked to the company's Siebel CRM software.
Microsoft is currently in the process of trying to take that internal effort and transform it into a set of software tools that other companies can use. Although the company used Outlook internally with Siebel products, it could be linked to a variety of other customer relationship management programs. Interest from outside customers has been high, Charles Fitzgerald, Microsoft's general manager of platform strategies, told CNET News.com.
While Microsoft doesn't expect to generate revenue from offering Elixir, it does stand to benefit when companies tie Office deeper into their business processes. Since the Elixir code Microsoft has developed works only with Office 2003, the company sees the tool as a way to get customers to upgrade. Longer term, such tools may also spur sales of Windows Server and other software.
"It works with Outlook 2003, so it drives both revenue and deployment there," Fitzgerald said, noting that a demo of Elixir recently helped convince one reluctant chief information officer to upgrade to Office 2003.
Driving upgrades to the latest version of Office is important both because of the revenue it generates as well as the fact that the company has noted consistently higher customer satisfaction when businesses are using later versions of its products.
Microsoft's Information Worker unit, which is responsible for Office, contributed roughly 30 percent of Microsoft's revenue last year, so driving new sales and upgrades is an imperative for the software maker. The company is looking to drum up interest in Office by offering add-ons like Elixir, by hosting the first-ever Office developer conference next month, and through an emphasis on server software that links to Office.
There is also a longer-term benefit to Microsoft. When companies adopt things like Elixir, it makes them unlikely to even consider rival productivity software. And because Office doesn't run on Linux, it also gives Windows a boost among businesses and governments that might be eyeing the open-source operating system.
"The more Microsoft can get companies to integrate Office technology into the fabric of their businesses, the less of a commodity Office becomes and the harder it is for companies to replace it with something like OpenOffice.org," said Gartner analyst Michael Silver.
The company had hoped to have the tool ready to offer broadly to customers by the end of last year but found there's still a lot of custom work that's needed for each company that wants to tie Outlook to its business software.
"We basically got to probably about 30 partners and said 'Hold on, we can't scale this yet' " Fitzgerald said. "We need to go take these internal bits and package it in a way that it is a solution that anybody can use. We're not there yet. We'll get there later this year."
The big picture
Microsoft doesn't look to be stopping with Elixir as it seeks to broaden Office's realm. With Office 12—the next major version of the software, due later this year or early in 2006—Microsoft is expected to increase the focus on server software that ties directly to Office.
It's part of a broad effort by the company to position Office as not just a set of individual programs but rather as a platform itself, onto which further development is possible. The company will tout a variety of such approaches at a conference next month for Office developers—the first such conference to focus on the overall Office system rather than on creating add-ons for individual programs.
Microsoft is hoping the omnipresence of Office—which is the overwhelming leader in the desktop software market—will help popularize its other software. The company's Business Solutions unit sells CRM and other software to small and midsize companies. So far, however, the unit contributes only a small portion of Microsoft's overall revenue.
The idea of creating programs that make Office more than just a collection of desktop applications is not a new one. Microsoft has been pursuing such a strategy for a few years, Silver said.
Among its first efforts was trying to make Excel 2002 a tool that could be used to analyze a broad array of company data using XML (Extensible Markup Language).
"We saw the beginnings with XML in Excel 2002, but it really came through with the release of Office System 2003," Silver said.
In Office 2003 Microsoft added the program InfoPath, which uses XML to shuttle documents throughout different parts of a company's business processes, moving the data among different software programs as well.
InfoPath made it possible to do things like Elixir, but it also requires companies to do a lot of investment on their own to link Office with their business processes. With Elixir, Microsoft aims to offer tools that make it far easier.
There is still likely to be custom work for each company that wants to use Elixir. In most cases, Microsoft said that work will be handled by companies other than Microsoft.
"We would use partners," Fitzgerald said. "The same way we do consulting today—We'll do 1 in 1,000 (installations), and the other 999 will be through partners."