From the ‘fear factory’ department came a post today, claiming that the forthcoming iOS edition of Office is the start of a trend that will have a deleterious impact on the total Office brand’s ability to generate revenue.
The gist of the idea is this: Microsoft has shown a willingness to price Office cheaply on the iPad. Also, the company will have to build a tablet-specific version of Office for Windows 8 devices. Given the iOS edition’s pricing, it will be cheap. Therefore, Office revenue will tank, as consumers pick that version of Office over the normal edition.
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This assumes that Microsoft will be forced to build a version of Office that is designed only for tablet use, and is separate from the normal Office suite. The author concludes as follows:
While it makes sense for the iPad/Windows 8 tablet Office apps to be competitively priced, the dilemma for Microsoft is how this affects the bottom line for its cash cow, desktop Office. If Windows 8 tablet users discover they don’t need all the fluff in the full suite, a very real possibility, Microsoft could see a significant loss of Office revenue to the tablet side. This would be a permanent desertion, as once you realize a $10 app is as good for your needs as a $100- $200 app, it is game over.
Microsoft may be planning on this rumored iPad version of Office as a dry run for its upcoming Window 8 tablet version. That may backfire if so, as it could force a much cheaper price point for Window 8. I can see the Apple ads already– $10 for Word for iPad, or $30 for Windows tablet?
This looming pricing dilemma is going to be one of the biggest threats Microsoft has had to deal with in a long time. It is unusual for a company to confront the damage it might do to a major segment of its own business, but that’s what it is facing. The company can’t (or shouldn’t) release a version of tablet apps for the competition (iPad) at higher than competitive prices, but pricing them properly could permanently affect a big portion of its core business. There should be some Microsoft executives having some late-night meetings in Redmond dealing with this.
The Sticking Point
I fundamentally disagree with this, because I find it fallacious to think that Microsoft is going to build, for any reason, a separate Windows tablet version of Office that is distinct from the forthcoming Office 15 product. Now, I fully expect Office 15 to have new user interface elements that will function well on a tablet, but they will be component to the larger Office suite, and not distinct.
The iOS edition of Office is simply a way to extend the brand and earn more. Microsoft has no need to build a third product, Office for Windows 8 Tablets, as Office 15 will complete that function itself.
This of course completely undercuts Kendrick’s idea that “once you realize a $10 app is as good for your needs as a $100-$200 app, it is game over,” as there will be no $10 edition of Word on Windows 8. Kendrick sees Microsoft building an entire new Office suite, which will “fall between the full desktop version and the old puny Windows Mobile version of old.” I do not see that happening. It would lead to consumer confusion, just to begin with.
There are a host of reasons for Microsoft to not build a separate Windows tablet version of Office, principally that it would directly undercut the idea that a Windows slate is a full computer, designed for production, and not just consumption (iPad). The functions that would exist with a separate edition of Office built for touch will be present in Office 15 (unless Microsoft decides to be a complete idiot), negating the need to go against its design philosophy. Also, there is a massive cost to developing two different sets of Office for the same operating system. On the face of it, it feels wrong.
Kendrick’s main argument is that “[t]he reality of what Microsoft eventually brings to the tablet may not be quite what these folks expect. The ARM version of Windows 8 won’t likely be the full desktop version of the OS, due to the difference in the hardware for tablets,” which is quite interesting, and thoughtful. However, simply understanding that ARM is a very unique challenge for the company to manage does not, in my view, allow us to imply that the Office product will undergo a philosophical metamorphosis.
And therefore, there is simply no need to fret about the Office brand losing its ability to generate revenue along expected lines. Microsoft might not be fleet of foot, but it certainly understands how to read a balance sheet (perhaps too well), and won’t do a thing to threaten the incoming dollars.
If I am wrong on this, and we will find out in the next few months, I will buy Kendrick a six-pack. I promise.