Quick Thoughts: Microsoft’s Office moves

Microsoft today made a series of announcements relating to Office running on platforms other than Windows:

  • Individual Office apps for iPhone are now available, mirroring those launched on the iPad earlier this year
  • Office will be coming to Android, starting with a limited beta/preview next week and full versions next year
  • All the versions of Office on iOS and Android will shift the dividing line between free and paid-for functionality significantly.

My initial reaction to the news was summarized in 140 characters in this tweet:

I wanted to expand on those ideas just a bit.

What the announcement says about Android

The announcement is most telling about Microsoft and its evolving strategy for Office, but it’s also illuminating about Android. Note that Microsoft announced Office for iPad in March and it became available essentially immediately for anyone running the latest version of the operating system. No delay, no beta label, just instant availability. But for Android, Microsoft is adopting a very different model, with a preview period with a limited number of beta testers and general availability coming months later. Why? Well, this is the same old story we’ve heard for years now: the fragmentation of the Android base, although we’re not even talking about Android smartphones. Go to the signup page for the Office for Android tablet preview and you’ll see that you have to specify the make and model of the tablet you want to try it on, and that’s the key here: developing complex software such as Office for Android is enormously more complex than on iOS, and especially if you want to achieve full feature parity across devices and platforms.

What the announcement says about Microsoft

The rest of the announcement is incredibly important in what it says about Microsoft and its strategy for Office. First, the context: Microsoft launched Office for iPad in March and says it’s seen 40 million downloads of the three apps since then. But the full functionality of the apps has only been available to Office 365 subscribers, and it’s added less than three million Home and Personal subscribers since then, at roughly the same pace as it added subscribers earlier.  People have been very interested in the apps, but most haven’t been willing to pay for the full functionality (or already had access to it through existing Home or Business subscriptions).

Why is that? Well, think about the kind of Office-related work you might want to do on an iPad. It likely isn’t writing the next great American novel, preparing the slides for your TED talk or working with pivot tables in Excel. It’s fixing a typo in a Word document, updating a cell in an Excel spreadsheet or inserting an extra slide in PowerPoint. Is that functionality worth $70-100 a year for most users? Likely not. Arguably, Microsoft drew the line between what was free and what wasn’t in the wrong place here, for obvious reasons: full Office functionality has always cost a lot, and there’s never been a version of Office available for free, so it was just following its long-standing pattern. But the way people use Office on tablets will be different from the way they use it on PCs, and Microsoft seems to be recognizing that. As such, it’s shifting the dividing line between free and not-free in favor of providing more functionality for free.

But I think there may be at least two other reasons for this move to provide more functionality for free. Firstly, Microsoft’s Consumer Office business is dwarfed by its Commercial Office business: last financial year, total Office System revenue was just over $24 billion according to Microsoft’s 10-K, but Consumer Office revenue was only around $3 billion over the same period. The vast majority of Office comes from businesses, who can now buy per-user licenses for their employees allowing them to use Office across multiple devices. At some point, Microsoft may decide that allowing consumers (whether acting in their personal lives or as employees) to use at least some functionality for free on some devices is a price worth paying to cement the position of Office as the productivity tool of choice for businesses, who pay most of the bills.

Lastly, Office has long suffered from the fact that it over-serves most users’ needs considerably, and the price charged for Office reflects 100% of the features whereas many users only use a small percentage. One of the attractions of Google Docs and other Office alternatives both for consumers and for businesses is that they allow users to accomplish many of the more basic tasks for free or for a much lower price. Microsoft should be considering a bifurcation of the Office product into at least two alternative versions: a more basic one with limited functionality offered for free or at least a lower cost, and a fully-featured one offered at the traditional price points. Perhaps it sees the new tablet and smartphone apps as an opportunity to experiment with just such a model.

What’s in and what’s out with the free version?

One other interesting thing to look at is what’s in and out of the free version. According to Microsoft’s blog post, these are some of the features that will be exclusive to the paid version:

advanced editing and collaboration capabilities, unlimited OneDrive storage, Dropbox integration and a number of other benefits.

It’s interesting that both of the recently-announced storage enhancements are exclusive to the paid version: Dropbox integration and unlimited OneDrive storage. The latter has a real cost associated with it, so it makes sense that it’s reserved for the paid version, but it’s intriguing to see a partner feature exclusive to the paid version too. I’ve pasted a screenshot from the iPad app that summarizes the premium features. I think there’s a risk that the dividing line feels arbitrary, but this list looks like it makes sense. It’s also interesting to see that Microsoft still requires the user to log in with a Microsoft account for the new functionality, even though a paid Office 365 subscription is no longer necessary.

Office premium features