How will the new Office for iPad work?

How will the new Office for iPad work?

Summary: You don't need a crystal ball to figure out how Microsoft plans to make Office work on iPad. Hint: It involves subscriptions. And the analysts who are following Office need to rework their spreadsheets and change their assumptions.

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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.

See also:

My ZDNet colleague Steve Ranger checked in with one spreadsheet jockey, 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 morphing into a devices and services company. They are aggressively getting out of the perpetual license business 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?

They won’t.

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:

office-365-lync-windows8

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 Office Web Apps. 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. (Spotify, anyone? Dropbox?)

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.

Topics: Cloud, Enterprise Software, iPad, Microsoft

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  • Will be interesting to see how MS handles apple's draconian policies

    I agree that Office will be free, you'll pay for the service. So once someone has downloaded the Office app, how will MS convince them to pay for the premium subscription?

    apple has been absolutely disgusting about locking users out of the ability to purchase things from web sites that were reached from an ios app.

    Kudos though to apple users. Getting Office on your ios devices is like a cool drink of water for someone who has been stuck in the desert for a decade. Watch sales of iwork plummet, there will be absolutely no sane reason to pay apple for a 3rd rate office product.

    Next step, get support for precision pointer devices into ios. Until that happens, ipad users will still suffer from a grossly inferior experience compared to lucky Surface users.
    toddbottom3
    • or, the alternative

      Microsoft pays someone to teach their programmers how touch only devices work and some day, we see functional Office that does not require mouse.

      iWork is just fine. It is also (surprise), file format compatible with Microsoft's product, for both read and write. Why anyone needs "more" that iWork on their iPad is beyond me.

      How is your Surface RT going? Do you often give it to your daughter to play? :)
      danbi
      • iWord for iPad

        "Why anyone needs "more" that iWork on their iPad is beyond me."

        Maybe you needs are light, but there are a lot of people who need features not available in iWorks for iPad. How do you solve that issue? Acquire another device, like a Mac, to have access to the features needed. So I need two devices for those users. Different from a device, like the Surface, where you have a full Office suite. Plus MS is working with touch versions, like Onenote MX. So both needs will be covered with a single device.
        So, what will happen first? iWorks grows up to be a competitive office suite or MS releases a touch optimized version of the Office applications? If we compare how Apple has done with iWorks in Mac (haven't received a major update since 2009) vs MS Office, it's clear that MS has allocated more resources and it will be ahead of Apple. Let's see how it goes. Anyhow, I don't think you care, since you are happy with iWorks.
        dvm
      • Why does anyone need a tablet is beyond me.

        Which kind of negates your iWork "solution". ;)
        William Farrel
        • It's great for killing time...

          ...while commuting on the bus doing internet research, emailing, game playing, music listening, video watching, etc. It even supports Remote Desktop (the screen resolution isn't the greatest, but it's usable).

          The only thing I can't do is develop applications locally, but hey, if I want to do that, then I put the tablet away and bust out my Dell laptop which has a quad core i5 and 8gb of memory.
          PollyProteus
          • Which brings us back to why do you need a tablet?

            You're already carrying a laptop on the train (or bus). I'm not anti-tablet, but aside from entertainment on a bigger screen, I find it inessential. I can browse the web on my phone and if I'm carrying a laptop, I'd rather use it than either a tablet or my phone.
            notsofast
      • MS Office Home & Student 2013 RT works fine without a mouse.

        Anyone who has to share documents with anyone who does not live in Apple's "walled garden" (I prefer the term "gilded cage"), has to be able to distribute Office-compatible documents. How they accomplish that is up to them but free MS Office Web Apps, or an Office 365 subscription are legitimate options.
        M Wagner
      • Apple

        Does not produce a productivity app that is touch friendly, as these kind of applications simply do not exist. No way someone is trying to write a document consisting of a lot of text with a crappy touch keyboard which cannot in any way compare to a real mechanical keyboard.

        Maybe Apple could try and fix their useless spelling and auto correct features ? Of all the mobile platforms they are by far the worst.
        sjaak327
    • You haven't tried Pages or Numbers yet, have you?

      I find that they work very nicely with the "precision pointing device" that is over this key on my keyboard: jjjjjjjjjjj.
      Userama
    • Do I care?

      Microsoft has screwed the pooch. I am a dev tech writer and author and i have switched from microsoft. I did not do it cold turkey, but over a number of years. As an android, iOS, Linux, osx user I really could not care about office. All of the companies I deal with have dual documents available (open office, and office). I now look at the squeeze of 60 usd per year that ms is charging and think, really you think your stuff is worth that much? Microsoft has become irrelevant in the new fields and moves like this are not going to change it.
      serpentmage
      • Comparing apples to what?

        Your comment on the $60/mo is absurd because that's an Enterprise plan with Portfolio management included, way beyond the scope of obtaining Office or an Office application such as Word. The reason to choose Microsoft Office over competing free or for-fee products is the whole of the platform, not the merit of any individual productivity application. Inasmuch as you can get that $60 worth of everything in the Office stacks, numerous servers included, for absolutely free for 90 days by providing only and email address, perhaps you should actually try it before you comment further. Give it at least 90 days eval time to explore at least a little of the Office 365 offering.
        gchefetz
    • Because, of course, it's so selfless and altruistic

      for a company to exploit the no royalties for free apps policy to hijack storefront space to drive traffic and revenue to your own company. I'll bet you also think it's evil for Sam's Club to prohibit Costco from putting billboards in Sam's Club stores with coupons for Costco products.
      baggins_z
      • Oh. Wait. You probably do.

        Because Sam's Club is the same company as Wal-mart, and wal-mart is evil simply because it's wal-mart.
        baggins_z
      • Not quite

        Your example ignores a very important difference between the iTunes store and Sam's Club. When I buy an Apple iOS device, the only way to get new software (without bypassing iOS) is through the iTunes App Store. If I want a new App, whether a game, utility, or software like Office, I have to go through that one channel to do so. Microsoft would not need to use the "storefront space" if you could purchase Office for iPad through the Microsoft website - but Apple doesn't allow this. The equivalent would be if you bought a refrigerator from Sam's Club, but then couldn't put food bought from other stores in it.
        SpreadthePanic
    • It's simple, ...

      ... Microsoft provides the client-side components for free via Apple's App Store. 30% of ZERO dollars is still ZERO dollars and denying Microsoft access to the App Store would get the attention of the Anti-Trust Division of the U.S. Justice Department - and certainly the EC.

      Kindle customers are still using their iPad Kindle Reader App and buying their books from Amazon.

      By the way, Apple has tried the same blocking tactic on MacOSX but there is a simple workaround from there as well.
      M Wagner
    • Tiny screens and lousy keyboards

      Anybody who needs to do REAL work, needs two things that tablets just don't have. One is a good keyboard for input and the other is a screen bigger than a postage stamp. Apple designed iPads primarily as interactive consumption devices. They are great for games, listening to music, reading and surfing the web. If you need portability, a MacBook Air is no heavier than some tablets, but it has a larger screen, longer battery life and a real keyboard. A large spreadsheet or multipage wordprocessing document is a time and productivity waster on a small tablet.

      As far as subscription and cloud computing, that is nothing new. It is just an updated version of the ancient mainframe computing model that existed before personal computers were invented. When the mainframe went down, or a connection concentrator died, the users sat around drinking coffee. Today's Internet and for the foreseeable future, the reliability and ubiquity of the plain old telephone system has not yet been equaled. When a person is flying at 35,000 feet, a normal laptop with office software can still be used, but a stupid cloud subscription model is useless in such a situation.
      arminw
      • Bigger than a postage stamp?

        Where are you buying postage stamps?

        Anyway, I can see this sort of being like Netflix, where you are already subscribed to some other service and access it through a free app. Precedent already exists here.
        Third of Five
    • uh...you want an App for an App(le) device?

      First thing you have to do is buy an Apple device. Why are you commenting on Apple when you HATE them so much.

      Seriously dude. That day when posts on forums and threads made people think about what they buy is gone. You are a picture of the past. Time for you to move on old man...just go. Like the horns on your avatar though!
      The Danger is Microsoft
  • Do not publish Office apps for iOS and Andorid

    If there are any morons at Microsoft, trying to make money from selling Office apps on iPad/Andorid, they should be fired immediately.

    If iPAd/Andorid users want to access Office, subscribe for Office 365 and use it thru a web browser.

    Microsoft now has all the hardware form factors, and Windows 8 works beautifully for touch and mouse, promote them and make money from software and hardware sales.

    Microsoft wasted so many opportunities to be the tablet King, even after the iPad was released. Microsoft has the best technology, all they need to do is to make the right decisions.
    Owlll1net
    • yes, please!

      Don't publish any Microsoft products for the iPad or Android. Be arrogant and become history in just few years. Please Microsoft... :)
      danbi