Office for iOS May Make Billions for Microsoft But Dooms Surface

| Analysis

Office for iPad Revenue

Microsoft may be forgoing more than US$2.5 billion in revenue per year by not offering its flagship Office suite on Apple’s iOS platform, according to Morgan Stanley analyst Adam Holt, reported by Fortune Thursday. While Mr. Holt argues that disappointing sales of the company’s Surface tablet and large estimated demand by iOS users for Office may be too financially compelling for Microsoft to continue avoiding Apple’s mobile platform, the implications of moving Office to iOS may doom the company’s mobile strategy.

Office for iOS has been rumored for years, with renewed focus occurring in late 2012 as Microsoft was preparing to launch its Surface tablet line. In late January, however, Microsoft CEO Steve Ballmer downplayed the rumors that Office would arrive on iOS soon, if ever.

Many speculated that Microsoft would limit the mobile version of Office to Windows 8, providing an incentive to business users to choose a Surface or other Windows 8 tablets over an iPad. With disappointing sales of ARM-based Windows RT tablets and limited supply of x86-based Surface Pro devices, however, Mr. Holt argues that Microsoft’s gamble isn’t likely to pay off.

Office for iPad

Mr. Holt’s logic is as follows: when not including basic versions of Office that come bundled for free on some Windows PCs, Mac users pay for Office at a rate that is three to four times higher than Windows users, with 30 to 40 percent of Mac users having purchased Office at some point compared to only 10 to 15 percent of Windows users. If Microsoft could capture the same roughly 30 percent of iPad users, and assuming an average Office selling price of $60, the company would generate $2.5 billion in revenue each year after Apple’s App Store commission.

While these figures make a compelling case for Microsoft to port Office to the iOS platform, it is not clear that 30 percent of current iPad users would pay for Office at any price, with fewer still willing to pay $60. After three years on the market, many iOS users have discovered alternatives to Microsoft’s productivity offering, and the absolute “need” for Office is not as strong as it was when the device first launched.

Where Microsoft could benefit, however, is with an increasingly large number of business iPad users, who would still find value in complete compatibility with Office file formats. While this could generate many potential sales for Microsoft, it would also significantly help Apple gain additional market share in the enterprise space, and may preclude any level of success for Windows 8 tablets.

Mr. Holt summarizes his position: “The math is compelling, and may drive MSFT to move Office.” Unfortunately for Microsoft, as compelling as the potential revenue is, the implications of moving Office to iOS are equally risky.

Comments

gnasher729

To quote Tim Cook: “If you don’t cannibalise your product, someone else will”. (Actually, Clayton M. Christensen, I believe).

DRH

MIcrosoft needs to remember its roots and that it is primarily a software company.

To quote the article, ‘After three years on the market, many iOS users have discovered alternatives to Microsoft’s productivity offering, and the absolute “need” for Office is not as strong as it was when the device first launched’. I fall into this category and have no use for MS productivity tools any more!

I can understand this is a difficult call for Ballmer and clearly Microsoft is waiting to see how things pan out with their hardware attempts before they pull the trigger, but I thnk its already becoming obvious that any further delay on this is going to be another huge mistake by Ballmer!

bdkennedy1

Apple’s Pages app opens and edits Word documents. Same thing with Numbers/Excel. Microsoft would never be able to charge their ridiculous prices when Apple has those apps for $10.

KitsuneStudios

Microsoft will probably make office for the iPad, but not until there’s a solid base of Windows 8 users.

Microsoft’s Touch interface is way behind in terms of developer support. To help boost this, they’ve made apps developed for Touch useful across the entire range of hardware: create a weather app or a touch game, and it can run on your phone, tablet, laptop or desktop.

I believe there are three major hopes Microsoft has for Windows 8 as a value proposition:
1) That consumers find value in legacy app support for tablets and ultraportables.
2) That the blend between touch and classic GUI interfaces will spawn a diverse new range of form factors and products that can fill many niches.
3) That the wide base of touch systems and flattened development guide will encourage developers to create apps to fill the weaknesses in their ARM market.

The problem right now is the technology. MS has few apps for ARM devices running Windows RT, and even the newest Intel processors are not quite up to the task of competing with ARM on mobile performance. This is why we got the dubious Windows RT devices running ARM first; because Clover Trail and the ULV Ivy Bridge chips were only available this year. Even then, the ULV Ivy Bridge has crappy battery life for smaller-than-Ultrabook tablets, while Clover Trail, excellent on battery life and a decent computational performer compared to arm, lacks the 3d graphic capabilities of modern ARM chips, and is seriously outperformed by the ULV i3.

Until the hardware is there, the carrot for this compromise is going to be Office.

I think MS will probably source Office to iPad, but probably not until the Windows 8 Touch ecosystem is either secure, or dead.

Laz

Except iPad can’t run PhotoShop, CAD, Visual studio or eclipse and many other windows based enterprise programs. And doesn’t have a usb port, or connect to a massive range of peripherals from mice to access dongles to card readers to scientific equipment.

Surface can, and so will get by on more than just office compatibility.

Me

Oh dear, Laz!

The iPad defines what tablet computing is and more than gets by without all that stuff you listed. So, if the Surface needs all that stuff then it’s not a tablet. You then gotta wonder what Surface is meant to be and look at all the other platforms that are more capable of running your “enterprise” stuff.

The surfaces doesn’t compete as a tablet and can’t be expected to compete against ‘actual’ enterprise class tools so where does that leave it?

davidneale

I thought that Surface was already doomed…

ipaqrat

I had an iPad. really tried to make integrate it into my writing workflow (I run MS Office Pro 2011 on a stable of Macs in different homes sync’d via SkyDrive.). I tried Pages and every other ios word processor none of them were up to my standards. They lacked features I need, or F’d up my bulleted lists, or crashed a lot - always some struggle.

So the iPad was relegated to reading magazines. I always used my phone for books and movies. I don’t use either camera - I prefer my Nikon D800 (duh).

Now don;t hate and don’t self deceive just because we all prefer Apple. A tablet is a form-factor, and the surface (RT and PRO) fit the specs and capabilities that the Wintel world defined back in 2002-2003, when Apple refused even to consider the tablet format. It’s Apple’s prerogative to feed it’s consumer-oriented revenue streams. It’s been Microsoft’s choice to compete using MS Office as a carrot/stick.

I’ve operated the Macs and Windows side by side for over 20 years. For power-users, there is no office suite still on the market that comes close to MS Office.

So now I have a Windows RT slate (asus vivotab). It has extended my Mac-based workflow way better than the iPad. And I get my Porsche magazines on it, too. And everybody knows 92.635% of the apps in Apple’s store are crap. Juz how it is.

KitsuneStudios

So, if the Surface needs all that stuff then it’s not a tablet.

That’s a very short-sighted view, and one that potentially limits the market for the iPad. Unless Apple does something similar, I’ll be getting either a Surface Pro or a Lenovo ThinkPad Tablet 2 sometime this year. For digital artists, they are an incredible value over any laptop.

Me

@ u ipaqrat,

If you ignore the form factor and just go ahead and stick the same ol’ on it then you get what the Wintel world got back in 2002-2003, a failure.

Apple understood that any form factor is necessarily going to require it’s own HCI paradigms and out of that was born the iPad which does define tablet computing. There were good reasons for Apple showing a phone before a tablet. They could never have released such a polished tablet had it not been matured in labs alongside or most likely before the phone.

I like that the RT has some sort of Office on it, that’s gota be a huge plus for ppl looking to ‘extend’ lol. I also like that MS are trying to respond to the form factor - cool, I get it.

However, the iPad still defines what tablet computing currently is. Juz saying wink

Me

Kitsune Studios getting a Surface! and I couldn’t be more pleased for you, played with an RT yesterday and was pleasantly surprised although not remotely interested.

Staying with the article we’re commenting on,... It’s seems that Ballmer and not Apple will be deciding if you need a pad or a Surface. Happy with Ballmer placing the bets?

It’s been said, iPad may not need Office, that time may have already passed. More correctly, iPad owners will find other ways of ‘extending’ there office work flow while Apple works on taking what they have learned from the iPad into new form factors and usage scenarios.

Surface can do Office for those that really want it that way and iPad can still define the form factor.

Laz

“The iPad defines what tablet computing is and more than gets by without all that stuff you listed.”

Seriously?  That is your argument?  So you are saying the iPad runs just fine without needing any of those annoying ways of getting corporate work done.

How would chemical engineering companies run?
How would software programming companies run?
How would bridge building companies run?
How would surveying companies run?
How would pharmaceutical companies run?

Like it / Believe it or not, most of the world technical companies use software or hardware that depends on the Windows software framework, and cannot switch to iPads whether they would like to or not.

However, they CAN switch to Surface (Pro - I am dismissing the RT as an experiment in ARM compatibility), or any of the other Window 8 tablet manufacturers, so they can have a full, powerful working environment, AND portability, all in a single device.

DOn’t get me wrong, I think the iPad is a genius device, but Surface has everything the iPad has including Windows software/Hardware compatibility, right out of the box. Therefore, it is not doomed.

Andhaka

Laz, Powerful working environment and portabily in a single device with a screen and a keyboard… uhm.. where did I see that again?

Oh yeah, laptops. smile

Sorry, But Surface Pro is a bad tablet and a mediocre excuse for a laptop. You can buy an Ultrabook for the same price (Mac or PC, pick your favorite) with the same price, better specs and better keyboard. Or a very good laptop for less money.

Sure, Surface Pro had touch, nice, but if you need a “real” working environment with Cad, Eclipse or whatever, the touch interface in not really a plus, isn’t it? wink

Cheers

me

Laz,

Wooosh! Hear that? Something going over your head.

Juz saying wink

Me

Laz,

The iPad doesn’t need to run all that stuff if some other form factor can.

The iPad will continue to define what a tablet is for.

You gettin’ it yet?

KitsuneStudios

The iPad doesn’t need to run all that stuff if some other form factor can.

What the iPad needs is irrelevant; The question is what customers need.

The iPad makes sacrifices to be a tablet computer. That easy touch interface means no multitasking, no easy file swapping between applications, no legacy app support, no easy universal peripheral support, and no support for complex control schemes necessary for complex jobs or games.

For many people, that’s enough. The advantages of a lightweight, simple, efficient device outweigh those drawbacks. But that acceptance ranges from “Perfect” to “It’ll do for now”. The question right now is how big the market is for those searching for a tablet-form alternative to their laptops, or a PC-powered alternative to their tablet.

Me

Oh Lordy!

Not you to KitsuneStudios?

Wait for it - wait for it…

Wooooooooosh!

See how high that one went?

When someone say the iPad doesn’t need certain stuff you have to be pretty disingenuous to suggest they are talking about the product and not the people that buy and use them.

As for your burning question… Nope, the market for that ain’t so big. Laz reminded us all how crap it was in 2002ish and nothing there has changed. I know, you’re arty-techi-designery type and somebody somwhere must want to build your dream tool/form-factor fully decked out and loaded up with miniaturised little bitty gear, ports and accessories. Why hasn’t someone done that for you yet, geez! they must not get it or perhaps their too busy selling mountains of iPads.

Cheerios for now wink

aardman

Surface is a design exercise to address the question “can one device successfully marry tablet and laptop features and usability?”  It’s an admirable attempt to answer that question and I think the answer it yields is “No.”  Microsoft says it screams “Yes! Yes! Yes!”  What do I know?  I just post stuff on the net.

However the fact that Office can be installed on Surface but has not ignited sales seems to indicate that folks who need a mobile device to do serious Office stuff don’t see the Surface as a viable option.  (I need help from an English major.)

ipaqrat

Back @ u Me

Concur with you regarding the demographic speaking its collective mind;  proof is in the pudding. Millions of iPad customers are not wrong. Apple’s efforts on the iphone/pad have been a pleasantly disruptive surprise.

My point was more to the semantics - the tablet as a technical platform vs. the interpretation of “tablet computing” as essentially media consumption.  The iPad doesn’t define tablet computing any more than a deck of cards defines poker.

Apple left out a huge chunk of tablet computing - creative business content and enterprise integration - by focusing media consumption revenue streams. And Microsoft left money on the table by using Office as a crutch for Windows. Lots of folks have attempted to close the gaps, but everything I’ve tried has pretty much sucked.

That’s why RT hit a target for me. Real, actual MS Office 2013 in a featherweight package runs for days between battery charges. I didn’t expect anything more. But it’s real nice that I can read Porsche magazines and paint purty pitchers, too, if I wanna.

Microsoft can keep Surface Pro; at that price point, I’d rather have a MacBook Air.

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