How Microsoft May Counter Apple's Secret Weapon

Whether you love your iPad or cannot live without your iPhone, one of the keys to Apple's (NASDAQ: AAPL  ) ability to win customers -- and keep them -- is the power of the iOS ecosystem. As Fool.com tech analyst Andrew Tonner points out, particularly when the company can lock you in across two separate devices, "it leads to extremely sticky consumer experiences." Apple is arguably the best in the business at accomplishing this, leaving one to wonder how the competition can pry loose the typical Apple user.

Unlike Google (NASDAQ: GOOGL  ) , which must establish a new paradigm -- a task the company has proven quite skilled at -- Microsoft (NASDAQ: MSFT  ) has a unique attraction that may be able to counter Apple's grip on customers. Where the appeal of the iOS ecosystem creates barriers to change for a lot of us, the latent appeal of both Windows and Microsoft Office has a similar draw. You may not want to go to the time or expense of converting everything in iTunes to a new format, but neither do you want to take all of your existing Office files and find new formats.

Microsoft for iOS?
In a recent interview with Bloomberg, Microsoft CEO Steve Ballmer was asked directly about a Microsoft Office release for iOS. His answer was cagey at best:

I have nothing to say on that topic. We're very glad with the product, very happy with the product that we're putting in market. It makes sense on the devices like the Mac and the PC. We have a product that we think makes a lot of sense. We do have a way for people always to get to Office through the browser, which is very important. And we'll see what we see in the future.

It's been the subject of rumor for some time, but no official answer seems forthcoming.

While other productivity suites already exist for iOS, many of which are compatible with Microsoft Office, none is a perfect replacement for the applications that are the standard for most users. The question facing Microsoft, then, is whether releasing a version of Office for Apple devices helps or hurts its overall efforts. There is certainly a reasonable argument to be made that, as a software company, Microsoft benefits from having its programs included on the most diverse collection of devices possible. This is, of course, countered by the reality that having recently entered the tablet market and still struggling somewhat in the smartphone market, Microsoft may prefer to limit its software to its own devices. If users can stick with their Apple devices and still benefit from Office compatibility and design, they are likely to opt for this combination.

The Google way
Google is a relatively late comer to both the smartphone market and the software/productivity world. Despite this apparent handicap, the company has found ways to control global smartphone market share and is changing the way in which productivity software is accessed and used. IDC estimates that Android commands 68.3% of global smartphone market share. This has been accomplished largely through both multimanufacturer competition and ownership of the "cheap" smartphone segment.

On the software side, Google's use of cloud computing has not only gained traction, it is arguably a significant motivation for the release of Microsoft 360 -- the cloud version of Microsoft's productivity solutions. Google came late to both of these games, but is making progress because of the skill with which it executes. The takeaway is that despite a "sticky" customer, there is always room for growth and capturing competitors' fans.

Compatibility magic
Apple has clearly figured out that customers tend to find an ecosystem that works and stick with it because doing so is just easier. When a user relies on two devices, the phenomenon is even more pronounced; in the context of a family or household, this factor grows again. It is, therefore, a secret weapon in a very real sense.

Where Microsoft can take this model and intensify it even further is within the business world. Businesses that are reliant of Microsoft for productivity solutions are not only the foundation of the enterprise side of the company's revenues, but they are a solution to the stickiness equation. If a user is resistant to changing systems because he or she has one or two devices that would have to be updated at once, various businesses many have tens, hundreds, or thousands for which this could be true. If the Microsoft Surface Pro -- due out on Feb. 9 -- can hold its own, the cost savings to business of maintaining legacy systems may easily dwarf the savings to an individual of needing to update music files from iTunes. (And maybe Microsoft will offer a free utility that can make this painless?)

The message is that Microsoft is sitting on a bigger and better version of one of Apple's keys to success. I believe that Ballmer has been cagey about an iOS Office release because he wants to see how the Surface Pro is received. If initial reactions are good, be prepared for a coming war. I like Microsoft's chances -- maybe not to win, but to grow even more important.

More expert advice from The Motley Fool
It's been a frustrating path for Microsoft investors, who've watched the company fail to capitalize on the incredible growth in mobile over the past decade. However, with the release of its own tablet, along with the widely anticipated Windows 8 operating system, the company is looking to make a splash in this booming market. In this brand-new premium report on Microsoft, our analyst explains that while the opportunity is huge, the challenges are many. He's also providing regular updates as key events occur, so make sure to claim a copy of this report now by clicking here.


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  • Report this Comment On February 10, 2013, at 12:26 AM, Melci wrote:

    Trouble is that it is far easier to import a Microsoft Word document into one of the myriad of Office-compatible apps on an iPad (tap to open!) than it is to go the other way for media or apps.

    A movie or TV show with Fairplay DRM on it is significantly more difficult to convert, but an iOS app is impossible to open on the Surface RT or Pro.

    Considering that 93.7% of all business tablets are iPads and 73.9% of all (non-BB) business smartphone activations are iPhones according to Good Technology, it is evident that the Microsoft ecosystem is not nearly so sticky...

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