President of Microsoft Business Division Dishes on Online Office, MS Business Model

Stephen Elop, president of the Microsoft Business Division, spoke to attendees at the Web 2.0 Expo in San Francisco on the status of a fully web-based version of Microsoft Office, the business models for selling software on the Web and the company’s efforts to make its products more interoperable.

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Elop oversees a wide-range of Microsoft’s portfolio, including Office, one of the company’s cash cows, and SharePoint, a document management and collaboration application that companies have used both internally and for their externally facing websites.

Elop told the audience that the online version of Office (known as Office 14) will be available sometime in the next calendar year. Back in November, Elop announced the general availability of online SharePoint, a document management system (among other things), and Exchange, Microsoft’s e-mail service for businesses. After the launch, in an interview with CIO, Elop noted that Microsoft was waiting on the release of online Office because it wanted the experience to mirror the quality people saw in the desktop version.

He struck a similar tone today in his talk with Tim O’Reilly, while taking a dig at Office’s disruptive (and free) competitor Google Apps, Google’s online software that includes Gmail, calendar, documents and spreadsheets. He implied that Google Apps offers very basic features — and little more.

“The Office franchise is a successful franchise used by lots of people,” Elop says. “We need to deliver innovation beyond bolding, underlining and italics.”

O’Reilly asked Elop what a continued gravitation in the industy towards online software — applications that people access through a Web-browser — would mean for Microsoft’s business model, which has traditionally relied on desktop software. Elop balked at the idea that client software would be marginalized.

“People say in layer three [of Web 2.0] everything is in the cloud,” he says. “I think that’s hogwash.”

To prove his point, he asked members of the audience to raise their hands if they had iPhones on them. He told them to keep their hand up if they had Facebook’s app for the iPhone, and many of them did.

“It’s the device, the app on that device, and the app combined with the Facebook Service,” he says. “What we’re trying to do, at various levels, is provide users with features that make sense in that environment.”

O’Reilly also asked how Microsoft had adapted its business model (and products) to work with the open standards embraced by technologies on the Web. Elop reinforced Microsoft’s pledge last February to make all its products more interoperable and available for people to connect their technologies to in the future.

“We’ve published 40,000 of documentation on our [Office] products,” Elop says. “[For iPhones] if you want to connect your Mail client to an Exchange server, we helped Apple do that. That’s interoperability.”