Microsoft's move to launch Office on Apple's iPad is expected to boost the company's total addressable cloud market, boost Office 365 subscriptions and position the company more as a services player.
You could argue that Microsoft's move to put Office on the iPad is late. You could argue there are plenty of competitors that'll limit the Office appeal. You could even argue that Microsoft's freemium model could be construed as desperate.
But one thing that's hard to argue is that Office for iPad makes a lot of sense on the business model front.
Among the key moving business parts:
- The freemium model (Office docs are viewable only to non-Office 365 subscribers) almost ensures upgrades to paid versions because the price point isn't a big hurdle.
- Given that freemium model, Microsoft will drive subscriptions—even though the profit won't be great because Apple will get a cut of the revenue from the App Store. Mary Jo Foley said Office on the iPad in the grand scheme of things because it'll drive subscriptions.
- All the money is on the back-end anyway. Note that Office on iPad was just one part of Microsoft CEO Satya Nadella's coming out party. Microsoft launched and Enterprise Mobility Suite (EMS) for enterprise looking to manage Windows, Windows Phone, Android, iOS, and Mac OS users. That bring-your-own-device play will bring in a ton of revenue for Microsoft's enterprise business, which carries the team anyway.
- The Office on iPad increases represents a $3 billion to $5 billion total addressable market, according to FBR analyst Daniel Ives. "Office for iPad (and eventually other devices) adds a long-awaited gateway to enterprise users, finally capitalizing on BYOD trends," said Ives in a research note.
- Microsoft can grab a piece of the mobile pie via software and services instead of a grand bet that consumers will run to Windows Phone and Nokia.
- A 15-percent attach rate for consumer Office 365 would drive revenue growth. Here's a look at Ross MacMillan's, an analyst at Jefferies, projected for Office on iPad.
No matter how you add it up, it appears that Microsoft has threaded the business model needle with Office on iPad and transitioned itself for cloud and mobile revenue going forward.