IBM's Office Rival

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Generating approximately $9 billion annually, Office is Microsoft's second most lucrative product—second only to Windows. For its part, Microsoft has said it expects Office customers to stick with the company, pointing out that Symphony may not have as many useful features.

The introduction of Symphony shines a light on the similar challenge facing the two old rivals. Both IBM and Microsoft are trying to simplify the complicated user interfaces of applications such as Word and Excel, which have over the years become bloated and overwhelmingly complex. And both companies have started to ponder what will happen when a new generation joins the workforce, one that has grown up with the seamless interactivity and often pared-down aesthetic of Web 2.0 products—a category which includes everything from social networking sites to sophisticated online applications.

"The big question on these companies' minds is: How does the participation-driven Internet migrate into the enterprise?" says Nick Gould, the chief executive of New York's Catalyst Group Design, an interface design and usability firm that has worked on both Web and desktop software projects with a wide range of companies, including General Electric (GE), Ford (F), About.com, and iVillage.com.

Security Still a Concern

The answer isn't obvious, but the pressure to find it is mounting. Free online applications such as Google's (GOOG) Docs; or Basecamp, a relatively affordable, visually sleek, Web-based project management application created by Chicago company 37signals; may not yet have been widely adopted, but they have attracted attention for being easier to use than some much costlier systems. "Web 2.0 has come along with a design philosophy of doing things much more simply, which is putting competitive pressure on bigger companies," says John Zapolski, a principal in the San Francisco innovation strategy firm Management Innovation Group. The next generation of employees, according to Zapolski, will have a lower tolerance for clunky design.

Of course, corporate IT buyers are looking for more than sleek interfaces from a software product. Concerns over security, compatibility, and potential future upgrade problems always loom large. And IBM will have to persuade potential clients that it can provide the necessary support for the product. (For now it promises paid-for support at some point, for an as yet undetermined fee.) But if it is deft in releasing upgrades, and as aggressive as it was when it first backed Linux in 1998, IBM's Symphony could prove to be the opening shot in a new round of fierce competition for the hearts, minds, and desktops of offices worldwide.

Matt Vella is a writer for BusinessWeek.com in New York.