LeTocq said there is good reason for that: "Microsoft simply hasn't given users a compelling reason to upgrade. What they've got works, so why switch?"
Since many companies upgrade with every other version of Office and the majority of users are on Office 95 or 97, Microsoft could see some demand for Office XP after its expected late-May release.
Cajoling customers into paying on a subscription basis would be one way to reduce and eventually eliminate the problem of competition with older versions. Office users paying by subscription would always have the latest version.
However, "this is a very critical time for Microsoft to adjust how this works," LeTocq said, referring to how people pay for Office. Microsoft released gold code to Office XP last week but doesn't plan to sell the new version at retail until late May or early June. But corporate customers subscribing to Microsoft's licensing programs are expected to get Office XP sometime in April.
"Microsoft clearly is being cautious with the locking feature and subscription scheme," LeTocq said. "That's why they're holding back on retail."
On the one hand, the company wants to reap as much up-front sales of the full version as possible, before fully exposing the subscription payment option. "The subscription thing is more a long-term play for Microsoft," Le Tocq said.
Besides potentially cutting down Office-to-Office competition, the subscription scheme and activation wizards may be tools for thwarting piracy.
"The more software becomes a service that requires a key or some more tightly controlled access, you're going to see more piracy taken out of the picture," Lucier said.
The activation mechanism, which locks Office to a particular PC configuration, is expected to help combat casual piracy, such as friends sharing copies of Office or small businesses buying one copy for many PCs.
"We found that the vast majority of piracy is this kind of casual piracy," said Lisa Gurry, a product manager for Office XP. "This Office activation wizard is designed to combat this casual piracy."
If successful, the mechanism could tap another source of Office revenue as more legal copies are sold.
But LeTocq believes customers forced to use the activation mechanism, which is a mandatory feature to use Office, may baulk and upgrade no further than Office 2000.
"It's interesting that Microsoft uses the word 'activation,' when it's really locking the code to a particular PC," he said. "That carries a different connotation, and Microsoft knows this."
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