Unseating Microsoft Office?

By: Roger Whitehead, Director, Office Futures
Published: 3rd October 2006
Copyright Office Futures © 2006

Tesco takes on software giants - ZDNet UK News

Richard Thurston — 2 October 2006
Tesco is to start selling cut-price software, in a move that could spark a price war among the major vendors.

The supermarket chain is aiming to steal market share from the likes of Microsoft and Symantec. It will offer six products all costing under £20, cutting a substantial discount compared with rival products.

There’s a press release from Formjet, the software distributor, here and a description of the Ability office product here. Note the power of bulk buying — Ability quotes a higher price than Tesco does. Tesco’s download site will be in operation soon.

I go along to some extent with the opinion, expressed further down the page, that either Tesco’s brand strength and marketing ability can make a dent in this market or it has not properly understood the market it is entering. I slightly favour the former.

This news ties in with the recent blog item from Bob Tarzey at QuoCirca, on office software for schoolchildren. His “self-respecting teenager with €100 to blow” might be prepared to spend £20 of it on Tesco’s offering.

Reader Comments

Posted: 3rd October 2006 | By Dale Vile :

Hi Roger

This is an interesting development, but the €100 MS Office licence covers the household (i.e. it can be installed on multiple machines if there is a student in the house), so the price differential is not likely to be significant for the average Tesco shopping household.

As I blogged recently:
/blogs/Freeform_Comment/2006/9/threats_to_ms_office_dominance_fur_.html
The Ability threat is probably more relevant in the small business space.

The other thing I discovered recently from talks with a Microsoft exec is that we should not under-estimate the leverage of MS Works in the home market via the OEM (i.e. bundled at no incremental cost) route. The usage (it was claimed) is extremely high and if augmented with online extensions, gives our friends from Redmond another weapon to fend off low cost competitive attacks.

Would be interesting to see the market open up a bit more though.

Posted: 5th October 2006 | By Roger Whitehead (Author):

Hello Dale,

Thanks for your comments. Your point about the cost of the M$ Office licence covering the household suggests that multiple PCs are the norm in British homes.

The only recent stats I can find are from the National Statistics Office. These show that, in 2004-05, only 62 per cent of households had a "home computer". Also, 57 per cent of households could access the Internet from home between in Q1 2006. I should have thought that with such a low overall provision, the number of households with more than one PC would be low. I'd be interested to see specific statistics about multiple ownership.

My personal experience is that it's almost always homeworkers in IT and graphics-related occupations who have more than one machine in the house. Other people I know tend to have just the one, if that, and it's often hogged by a child doing his or her homework (at least, that's what they say!). These people are, in the main, Sainsbury's and Waitrose shoppers and, one would assume, more likely to have children going through to tertiary education.

I agree with your point about the spoiling effects of bundled 'free' copies of M$ Works in the home market. Presumably that gives the Office marketers nearly as much of a headache as it gives Microsoft's rivals.

Regards,

Roger

Posted: 7th October 2006 | By Dale Vile :

Good point about the number of PCs in the average household. No idea on numbers there.

I think the supermarket thing is a real interesting dynamic that is developing in the market. Does anyone know how successful they have been with their cheap back catalogue games offerings? Has this damaged the market for premium games?

One thing for certain is that it is all very healthy. MS needs competition in some of these areas, though I have to admit to being torn about things like the desktop OS and Office products markets becomng too fragmented - that would be counter-productive for the world in general, both business and consumer.

Apologies for that not being a very fashionable idea ... well, no apologies actually :-)

Posted: 9th October 2006 | By Roger Whitehead :

Thanks, Dale.

> I think the supermarket thing is a real interesting dynamic that is developing in the market. Does anyone know how successful they have been with their cheap back catalogue games offerings? Has this damaged the market for premium games?

The incursions of supermarkets tend to unsettle most markets, I feel.

I've no idea on the games figures. It's not a market I've ever looked at.

> I have to admit to being torn about things like the desktop OS and Office products markets becoming too fragmented - that would be counter-productive for the world in general, both business and consumer.

I think we're a long way from the Balkanization of the O/S and office tools markets. Even if Microsoft's dominance were really challenged -- as opposed to being nibbled at, as today -- I expect there would only be two or three significant contenders. So long as easy dynamic exchange between their file formats were possible, with reasonable fidelity, even that wouldn't/shouldn't present problems. Having said that, M$ has always done a good job of creating incompatibilities among its own product lines. 8-)

Roger

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