Microsoft 'Equipts' Consumers

Why would anyone pay $150 for Office 2007 Home and Student when they could get it and more for less than half the price?

That's the question Microsoft is hoping some consumers will ask about Equipt, the new subscription offering formerly code-named Albany. The question Microsoft might not want these same people to ask: Why spend 70 bucks when Google Docs is free?

This morning, Microsoft announced that the subscription product would be available through 700 Circuit City stores on July 15 for a 12-month subscription fee of $69.95. Equipt comes with the aforementioned Office version, Windows Live OneCare, Mail, Messenger and Photo Gallery. The subscription service also connects to Office Live Workspace for document sharing and collaboration. Equipt can be activated on up to three PCs, which is consistent with current Office Home and Student and OneCare licensing.

I expect plenty of commentators to view the announcement as a Microsoft versus Google thing. There's a little of that maybe, but I see Equipt more as Microsoft advancing further into the consumer subscription market and more closely aligning desktop and Web services. Revealing: Microsoft is leveraging a very different distribution channel than Google (more on that in a few paragraphs).

The question Bryson Gordon, Office group product manager asks: "How can we take rich client experiences we have today and how can we extend them into the cloud?"

That's exactly the thinking to expect from a Microsoft executive—how to maintain and extend the relevancy of desktop software to Web services. More importantly: How to best provide consumers with the newest software, while collecting ongoing subscription fees from them. "This is a subscription service, and one of the things we're committed to is making things better over time," Bryson said. "With Equipt everything is up to date." That includes the newest Office version.

Microsoft also sees Equipt as an anti-piracy effort. "The majority of the sales of Equipt are going to be coming from people that have an old copy of Office or received a copy from Bob up the street," Bryson said.

Equipt risks more to Microsoft than it offers a competitive advantage against Google's Web-based productivity suite. The subscription software/service could pull sales from à la carte OneCare and full-version Office Home and Student, which accounts for the majority of Office retail sales, according to the NPD Group.

"Yeah, there probably is going to be some cannibalization," Bryson conceded. But Microsoft research shows cannibalization will be low, he emphasized. Maybe, but I wonder about Office Standard. It's not like Microsoft is carding people to see where they'll be using the software. For many small businesses, particularly those already using Hotmail, Equipt may be all the Office equipment they need.

That's good segue for Microsoft's novel, early distribution channel for Equipt. "To reach the right kind of customer, we need a certain kind of sales motion," Bryson said. "With Equipt it's not just a process of put the product on the shelf, or put the product on the Web. Retail is the right place for us to start."

But not just every retail store. At launch, Equipt will only be "available in 700 stores across Circuit City." Bryson said. Microsoft has chosen a single distribution channel. Bryson said Microsoft picked Circuit City because the retailer was ready to engage customers in a "kind of a high-touch scenario. Equipt is better sold than bought."

Really? What's so high touch about Office? Everything. Most products are sold, not bought. Marketing matters—it's everything. Equipt is different and potentially confusing to consumers because it changes the model: no perpetual license, 12-month recurring fees and blended desktop and Web-based products. Equipt should be sold, as should many, many other Microsoft products that get shelf space and little more.

"We were looking to limit the distribution of this...to ensure the sales process was in place," Bryson said.

The choice of a single retailer is smart. Microsoft partners better than any other company on the planet. But to a fault. Microsoft deals too evenly with too many partners. Some partners do better than others; they should be given preferential treatment. I commend Microsoft for singling out Circuit City.

Bryson made it absolutely clear that Equipt will be available through other channels, and perhaps, even shortly from other retailers. Circuit City distribution puts other retail partners on notice: The rules are changing. Microsoft needs to do a whole lot more of picking favorites even if it pisses off some partners. A big Windows Vista plus Windows Live marketing blitz is soon coming. If I were Microsoft, only the best and most cooperative retailers would get the in-store displays, co-marketing dollars and Sunday circular ad support. It's long past the time when Microsoft played favorites.

Something else before closing: The name works. Equipt evokes good connotations of having the right equipment. Microsoft's nomenclature continues to slowly improve. That said, the packaging and subbranding, which I didn't see until today, really don't work. Rather than giving the new product its own, clear-brand identity, Microsoft put box shots of Office Home and Student and Windows Live OneCare on the Equipt box. Mixing brands like this might seem like a good idea by leveraging existing products. I don't agree. Like other, newer Microsoft products with better nomenclature—Expression Studio, Zune or Surface, among others—Equipt should have a distinct brand and logo. Hopefully, the in-store marketing materials will be better.