Microsoft: Ad-Supported Office Due Soon

SAN FRANCISCO — It’s not clear whether Microsoft executive Stephen Elop intended to preannounce anything during his keynote session here, but that’s how it played out. During an onstage Q&A session with Web 2.0 Expo’s Tim O’Reilly, Elop said Microsoft (NASDAQ: MSFT) plans to release an ad-supported version of Office that will be available online.

And when asked why Office wasn’t available on the Apple iPhone, he said, “Not yet, keep watching.”

In the sometimes-freewheeling exchange, Elop defended Microsoft’s plans for for Office, which is facing new threats from free Software-as-a-Service (SaaS) alternatives like Google Docs.

In particular, he said Microsoft wasn’t at all worried about competitors like Google. “What you’re saying there is you can get bolding, underlining and italics for free. That’s not hard to compete with at all,” Elop said. “What we’re saying is a subscription fee can only come if we’re providing value.”

That’s not to say that Microsoft hasn’t been afraid to experiment with Office on a SaaS model. “We’ve shown lightweight versions of Excel and Word for the cloud,” similar to Google, Elop pointed out. “An ad-supported version of the Office suite is coming.”

Elop expects a beta version of the online version of Office to be available in the months ahead, though he said a final version won’t be out this calendar year.

Elop also stood fast on Microsoft’s “software-plus-services” strategy as being in tune with the needs of IT. Software-plus-services is Microsoft’s answer to SaaS providers such as Salesforce.com. SaaS is rapidly gaining favor in the enterprise because of its low costs for setup, management and maintenance, and the reduced strain it places on the corporate datacenter.

But rather than focus strictly on access to applications via the cloud, Microsoft’s software-plus-services strategy for Office and other apps taps both the Web as well as the power of rich clients such as PCs running Windows locally.

For instance, he said Microsoft will be looking to add value to the online version of Office by offering tight integration with its popular SharePoint collaboration software, which he said is a billion-dollar-a-year business for Microsoft.

Microsoft has to take Office’s wide use when considering any changes though, Elop explained. He said there are over 500 million Office users worldwide that would have to relearn how to use the program if Microsoft made significant changes to the user interface.

“Look at what just happened with Facebook,” he said, referring to the social networking giant’s new home page design that, after thousands of users protested, it ultimately tweaked to address complaints.

“You make a little change, the world erupts, and they undo it,” Elop said.

Still, the costs may not be as high on paper if Microsoft did decide to undertake sweeping changes with Office: Elop admitted that while there may be over half a billion Office users, only about half actually paid for the software.

The other 250 million either borrowed or stole the suite, he said.

My kingdom for a Kindle?

Elop shied away from going into more detail on Office’s ad-based and iPhone editions, but he did touch on another mobile device that’s won his affection.

“I love my Kindle,” he said.

Elop admitted he wished Microsoft had a product like the popular Amazon (NASDAQ: AMZN) e-book reader. Amazon earlier this year released the second-generation of its Kindle, sporting a sharper display and features like text-to-speech. Amazon in recent weeks also debuted a Kindle client for the Apple (NASDAQ: AAPL) iPhone.

He said devices like the Kindle and the iPhone are indicative of new devices that rely on input like touch rather than traditional keyboards. He also mentioned the gesture-based interface used by the Nintendo Wii game console.

“Within the business division, there’s no question — there are lots of new possibilities” that could ne enabled through similar sensors, he said.

He noted Microsoft is hard at work on alternative interface technology. For instance, the company has garnered a fair amount of interest around its multitouch table PC, called Surface, and recently demonstrated a second generation of the device.

And, Elop added, the software giant isn’t holding back on R&D spending.

“Microsoft is taking a lot of heat in these tough economics to slash costs,” he said. “But we’re spending $9 billion in R&D even on stuff that won’t show for ten years.”

This article was first published on InternetNews.com.