It's been talked about in various circles for quite some time, but this is the first time I can remember Microsoft actually admitting that they would consider giving away free, ad-supported versions of Microsoft Office in an attempt to fend off the potential competition coming from other office suite sources. The company has increasingly been facing pressure from the Open Office/Star Office space, especially among some companies and governments that prefer to go with more open solutions. However, it still hasn't taken a serious bite out of their market share. The more serious competition may actually be coming from elsewhere, with a variety of companies starting to offer web-based office productivity tools. With competition coming from such different angles, it's good that Microsoft has realized that it's going to have to change at least some aspect of what they're doing. While a lot of people thought this was part of the plan behind their "Live" strategy -- that effort has mostly been focused on different types of web services. So, the response here appears to be to see what happens if they go lower down the chain with a free ad-supported version of Office. However, it still seems like they may be thinking about this incorrectly. They're talking about how they can use this to "woo entry-level users," which suggests they may not recognize the type of competition they're facing. The real threat from the offerings coming out of Google and a few different startups isn't really that they're free, or for "entry-level" users, but that they allow users to do things that traditional desktop software doesn't really allow. The power of things like Google's Writely is how it can be used for collaboration, not just that it's free. It's good to see Microsoft thinking about these issues, but if they are only looking at it from the viewpoint of "how do we offer a free version," then they risk missing the real advantages that their competitors are serving up.
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