In or Out? That is the question.

Some people ask me why OneNote is a standalone application, and not part of one of the Office suites (i.e. not "in the box").

There are advantages to being in the box for sure. One is distribution. A lot of people will see a new product if it is included in a bundle with Word, Excel, Outlook and PowerPoint. And maybe some people will be swayed to buy a new version of Office if it includes a new application they are interested in.

On the other hand, it is hard to build a new business. For one, what is the price of a new version of Office that includes a new application? Well, it is probably the same as it always was - people are not keen on price increases, even when they get new applications in the box. That means there isn't an increase in revenue, except an incremental one if more copies of the new Office are sold. And there is another issue - you can’t put things that have value in their own right into Office "for free". Instead, you have to tweak the effective discount on the other products in the box (e.g. Word) to take into account the fact that you put another $X of value in the box but are still charging the same overall price. Then some rules around how much discounting you are allowed to do start to kick in. That means you might have to lower the price of the standalone versions of some of these products. Ok, so at some point we're losing track of the goal here, which is to increase overall revenue.

Being a standalone application is more fun. You can measure your success (or lack of it) directly. You are also free from all this discounting price waterfall mumbo-jumbo. You can set your price and discount the way you want to. But you have some huge barriers. No one knows you exist. And you have no advertising budget. But theoretically, if you ever do succeed in becoming a mainstream must-have application, then you can become a significant business on your own. And that will be in addition to Office, not replacing part of it. That's the theory anyway.

When we announced that we were going to be standalone only and not part of Office, some of the people in the press who track our every move thought that meant we weren't "serious" about OneNote. What they didn’t realize was that in fact we are very serious - that's why we are a standalone application. Naturally this explanation didn’t faze them (see "the myth" below). One of the things about being Microsoft is that people don't believe you - no matter how much sense you make. I am tempted sometimes to try reverse psychology to get my point across, but haven’t yet had the cojones to do that in any official capacity. Then again if I did of course I couldn't tell you 🙂

Comments (4)

  1. but our view is that if it’s good enough to go in the box (Access?!) you should raise the price for it and have the courage of your convictions 😉

    Business being business, perhaps version 2 with the API would be the time to bundle up. Being in the box would also help to counter the Tablet myth… the downside would be being tied to standard Office release dates. As a standalone, can you go at your own dev pace?

  2. Well, there were definitely a lot of people on the "in" side of the argument. The problem was that we already have 6 flavors of Office (Basic, Standard, Student Teacher, Small Business, Professional, and Professional Enterprise). Adding OneNote to any existing edition would cause us to rase the price. Adding OneNote to Professional Edition would create a new, more expensive "best" verison of office. That’s what we did with InfoPath to create Professional Enterprise, which only business can license. But we didn’t want to add both of them to "Enterprise" that woudl limit the suite with Onenote to enterprises (wouldn’t solve your problem) and because we’d have to raise the price too much or discount too much. It’s complex, but I understand the desire to get OneNote…

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