Peter O'Kelly and I fielded a call yesterday from Donna Fuscaldo of Fox News Business. She posed the following question: "Should consumers use these new free software packages [e.g., IBM Lotus Symphony or OpenOffice.org] as an alternative to Microsoft Office or Google's browser-based software?"
It's an interesting question, and one that shows that even general business reporters are noticing what Peter calls "an embarrassment of riches" in the space. Given that some suites are free (versus hundreds of dollars), you sort of feel the urge--at least I did--to say "Yes." However, the answer really isn't that simple.
Another thread from the interview was Microsoft's "ultimate steal" offer -- ~$60 for Office 2007 Ultimate for students (at least half-time and with a .edu email address), so for a key part of the productivity application target market, Microsoft has already done what Guy suggests (dropping the price of the full suite).
I also noted, during the interview, that the embarrassment-of-riches theme extends to workspace-based tools such as wikis, document libraries, and discussion forums. E.g., I'm using a free Wetpaint wiki to facilitate a project with my local public school system, and it has been very effective.