Microsoft says features such as Smart Tags will speed up work, but many customers still do not see a need to move from Office 2000 despite licensing changes that make early upgrades cost effective

Microsoft is tapping some of its large corporate customers today to help launch Office XP, the first of three major products the company is releasing this year.

The software maker will unveil Office XP, the latest version of its productivity suite, during a New York event hosted by Microsoft Chairman Bill Gates, and at other, smaller events around the world. In New York, executives from Amazon.com, Ford, Lexis-Nexus, Turner Broadcasting and UPS are expected to join Gates and explain why their companies are moving to Office XP.

Despite those endorsements, Microsoft may find Office XP to be a tough sell, said Gartner analyst Michael Silver.

"Many companies just aren't that interested in Office XP," he said. "I'm hearing from a lot of people (using) Office 97 -- they're not going to XP because they don't see the need. Those that do see (the) benefit say they need more time to see how that's going to work for them."

While Office XP is important to Microsoft -- Office products generate some 40 percent of the company's revenue -- it is just one of three major releases this year. Also on tap are Xbox, Microsoft's entry into the highly competitive video game market, and Windows XP, the upgrade to its ubiquitous operating system.

Meanwhile, Microsoft is awaiting a crucial decision in its antitrust battle with the US government. A federal judge has ruled that it violated antitrust laws and should be broken into two companies. A decision on Microsoft's appeal of that ruling is expected any day.

At the Office XP launch Thursday, Gates' pitch will focus on how Office XP unlocks "hidden knowledge" and "will transform personal productivity," according to his prepared remarks. He will explain how businesses create 740,000 terabytes of a data a year -- roughly equivalent to seven billion copies of the Webster's dictionary. For businesses, the challenge is how to turn that information into knowledge.

Lisa Gurry, product manager for Office XP, said a Microsoft study concluded that people spend "40 percent of their time creating content and 30 percent looking for information." Office XP's new features "can save people up to ten percent of their time during their day."

The partners assisting Microsoft with the launch are expected to detail how they have benefited from switching to advance copies Office XP. Many of the testimonials will focus on XML (Extensible Markup Language), a way of formatting complex documents for delivery over the Web.

In the case of Ford, Chief Information Officer Marv Adams will explain how the company uses Office XP's XML support to electronically notify suppliers about component needs.

Lexis-Nexus and UPS will focus on a specific XML technology Microsoft calls Smart Tags. Those XML components can be used to pull down information for formatting, inserting data or checking information, such as a spelling correction made by Word 2002. Smart Tags can also be used to access external information, such as stock quotes, from within an Excel 2002 spreadsheet.

Lexis-Nexus will tout its use of Smart Tags to provide access to more than 15,000 information sources from within Office XP. UPS depends on the feature to allow customers to track packages and monitor shipping costs.

Turner Broadcasting, by contrast, uses Office XP's SharePoint Team Services for employee collaboration. The feature lets companies create Web sites for sharing calendars, contacts and documents using a browser.

To promote the feature, starting Thursday, Microsoft's bCentral small-business Web site will offer Office XP users a free 60-day SharePoint Team Services trial.

But not all the features are winning rave reviews. In a controversial move, Microsoft chose to deal with virus-infected attachments by blocking them. Outlook 2002 will reject more than 30 file types as e-mail attachments, including executable (.exe) program files. (Microsoft will later issue instructions for disabling this blocking feature.)

Microsoft also hasn't done away with "Clippy," the controversial and widely maligned electronic Office assistant. While the company used Clippy's retirement as part of a $30m (£20m) Office XP promotion, he is easily installed with the new package -- if a person chooses to do so.

Office XP is the first of three major product launches Microsoft has slated for this year. The company also will introduce Windows XP on 25 October and the Xbox gaming console on 8 November.

But Office XP is by far the most important, say analysts, as it is Microsoft's cash cow, accounting for 37 percent of revenue in the most recent quarter and 47 percent in fiscal 2000.

Still, customers may not line up to buy the new version, analysts warn. "There is no easy, compelling core value in upgrading to Office XP," said Forrester Research analyst Frank Gillett. "Microsoft is fiddling with the deck chairs, but the ship runs nicely, thank you."

To rally support for Office XP, Microsoft is blanketing the world with 100 launch events, including the Gates gathering in New York, another with chief executive Steve Ballmer in Chicago, and sessions with other executives in Washington, D.C., and London, among other cities.

"We have 130,000 customers signed up for the launch events," Gurry said. "By contrast, 45,000 people attended the Windows 95 launch, and that was considered a really big event."

Still, Gillett and Gartner's Silver see large businesses waiting as long as possible on Office XP, even though, by Microsoft's estimation, 60 percent of companies use the two oldest versions, 95 and 97.

"We're hearing a lot of organizations are going to stay put with the version they have got," Silver said. "For many, the features they have are enough."

Microsoft's response is to add more complex features, such as Smart Tags, Silver said.

"Smart Tags can do a lot if you can figure out how to use them," he said. "If I have a feature I can use out of the box, maybe the upgrade would be more compelling. Smart Tags is like giving me a fishing rod, but I still have to figure out how to fish."

Gillett agreed. "We'd all rather go home and play with our kids rather than learn a new version of Office," he said.

To encourage upgrades, Microsoft made licensing changes that will compel the majority of companies to move to Office XP before 1 October should they want to get the cheapest upgrade price in the future.

By looking just at the largest customers with 1,000 users or more, Gartner estimates Microsoft will reap a windfall in Office upgrades of up to $820 million before 1 October, Silver said.

See also: ZDNet UK's Windows XP News Section.

Have your say instantly, and see what others have said. Click on the TalkBack button and go to the Microsoft forum.

Let the editors know what you think in the Mailroom. And read other letters.

Copyright © 1995-2010 CBS Interactive Limited. All rights reserved
ZDNET is a registered service mark of CBS Interactive Limited. ZDNET Logo is a service mark of CBS Interactive Limited.