The trouble with staring into a crystal ball for too long is that you might forget to look up occasionally. If you get too focused on trying to predict the future, you miss realizing that the entire landscape has shifted around you.
Exhibit A is the latest batch of reports from a bevy of analysts who want you to think they’ve got Microsoft’s enterprise software business figured out. Literally, as in figuring out how much money a hypothetical Office for iPad would contribute to Microsoft’s bottom line.
But they’ve plugged all the numbers into a spreadsheet that’s using assumptions from a bygone era.
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My ZDNet colleague Steve Ranger , who was more than eager to add up how much money Microsoft can make by selling Office in the iOS App Store:
Selling Office with all-new iPads across 2014 could raise $1.3 billion, [investment banker Morgan Stanley] calculated; selling Office (at $60) to a third of the iPad install base could also raise $2.5 billion, with Android sales on top.
That would make more money than Microsoft could generate from an 11-percent market share in tablets. "Office exclusivity on Win tablets important, but the iPad opp. may be larger," said the note; "the math is compelling and may drive MSFT to move Office." [emphasis added]
Wait, that's not a crystal ball. It's a rearview mirror.
Sometimes I just want to slap these analysts upside the head and ask them to connect the dots, for crying out loud.
Listen up, Morgan Stanley:
Microsoft is. They are with Office and moving to a subscription model with Office 365. So why would they deliberately build up that old-fashion license business on another platform, where they would have to pay Apple a 30 percent cut of the proceeds on every sale?
I’m assuming that Microsoft is going to give away its iOS app for free. Just like it’s currently giving away its OneNote apps on iOS (free for up to 500 notes, then a paid upgrade) and Android (a similar freemium model) and Windows 8. Just like it’s made its Office Web Apps/SkyDrive combo free.
What you can do with the free app depends on the account you use to sign in.
If you want to see the business model in action, look at the free Lync app for Windows 8. I’ve highlighted the relevant part for you in this snippet from the listing at Microsoft's Windows 8 Store:
That’s how I expect Office for iOS to work.
With a free iPad Office app, the business model should be roughly the same as what you see when you sign in at Office.com. With a free Microsoft account, you get all the free Microsoft services: Outlook.com (nee Hotmail), SkyDrive, and the free Spotify, anyone? Dropbox?). With a paid subscription, you get Exchange Online, SharePoint Online, and Lync Online. Presumably an iPad app would allow more powerful editing tools than a web app. And if only paying subscribers are able to fully use the app, well, Microsoft wouldn’t be the first. (
It’s a huge boon for corporations that buy Office volume licenses. They’ll be able to allow their employees to install Office on a home device, including an iPad, without having to worry about managing updates and tracking unauthorized installations.
I’ve heard from some readers who are puzzled why Microsoft is allowing Office to be installed on up to five devices per user for an Office 365 business plan (Small Business Premium, Midsize Business, or Enterprise). But it makes perfect sense when you imagine how that works with Office for iOS and Android in the mix. If you get to use your installs on a Windows PC at work, a Windows laptop or a MacBook at home, an iPad that is your go-to mobile device, and an Android smartphone, you’ve still got one left.
Oh, and of course a new, subscription-friendly Office for the Mac is under development too, although Microsoft isn’t talking much about it. If past performance is any guide, it will come out roughly a year after its Windows counterpart, early in 2014, if not sooner. The new Office for the Mac should work the same as the Office 365 subscriptions. It’s just another device, running Microsoft’s most important service.
Gartner’s Michael Silver is also quoted in that post and also appears to be thinking of Microsoft as an old-style software company:
"The Microsoft Office group needs to decide if they're in the business of selling Office products or propping up Windows," says Silver. "If they're in the business of selling Office, then the iPad and other tablets are a huge opportunity — and if they don't do it, someone else will."
If and when they do come out with it, they will need to decide how to price it. If the product does too much of what Office does and they price it too low, then that's going to cannibalise the traditional desktop Office product.
Microsoft is already cannibalizing its desktop Office product with Office 365. So, how much should they charge for an Office app on iOS? Is this a trick question?
Microsoft is getting out of the business of “selling Office products.” That’s why they’re aggressively pushing Office 365 in subscription plans. And Office 365 isn’t about “propping up Windows,” either. It’s about making Office, a service, run on any device, whether it is powered by some flavor of Windows or iOS or Android. That makes Office less dependent on Windows and better positioned to grow in the multi-platform world that Microsoft wants to compete in.
Releasing a good free iPad app that becomes a great app when used in conjunction with a subscription? If the new Microsoft is serious about becoming a devices and services company, that's how they will play this.