The Merrill Lynch survey polled CIOs at 75 U.S. companies and 25 European ones on a number of issues, including whether they were "likely to upgrade to Office 2003 in the next year."
A total of 65 percent said "no," a result Merrill Lynch attributed to complex new server-based functions--including capabilities based on Extensible Markup Language (XML)--included in the new version of the productivity software. "Without a new killer app in Office, the upgrade cycle looks to be gradual until new XML-based technologies take hold in the broader market," according to the report.
A Microsoft representative said initial sales of Office 2003 are in line with expectations and well ahead of early results for the previous version of the software, Office XP.
"Customers should always make sure they see value in their software purchases," the representative said. "Microsoft's job is to show them that value in Office, and that's exactly what we're in the process of doing with the Microsoft Office System. We're confident that as more companies evaluate the Microsoft Office System, they'll see for themselves the value in the investment."
The survey results are in line with predictions accompanying the launch of Office 2003 in October, when analysts noted that businesses would need to do significant testing and resource planning before taking advantage of XML functions and other server-based tools.
Paul DeGroot, an analyst at research firm Directions on Microsoft, said the 35 percent response is roughly in line with the share of businesses that buy Microsoft products under enterprise licensing agreements and therefore already would have paid for the Office 2003 upgrade. Those businesses will act sooner to take advantage of enhancements in individual applications, such as the Outlook e-mail client, he said. Others will wait to have the underpinnings in place for Office 2003 server functions.
"You're looking at a much longer sales cycle with all the server functionality," he said. "This is not a department-level purchase decision anymore. You really need to get the CIO involved and design new processes...Even if they really like the product, I can easily imagine them taking six months to a year to build the back end and build the integration support they need."
The Merrill Lynch survey also found that a majority of CIOs--58 percent--responded affirmatively to the question, "Are Microsoft's security issues causing you to seriously consider open-source desktop alternatives?" Microsoft recently acknowledged that security concerns have made businesses reluctant to sign long-term contracts.
