Will Free Productivity Software Challenge Microsoft Office's Dominance?

With Google (NASDAQ: GOOGL  ) now joining the fray, the onslaught of "free" continues to face-off against Microsoft's (NASDAQ: MSFT  ) productivity suite, Microsoft Office. Could the growing alternatives of free productivity software threaten Microsoft's dominance in the category?

The rising fad of free
"Everyone likes free stuff," said the Google Drive team last week in a blog post. On that note, the company followed with an announcement to make its mobile productivity app, Quickoffice, free for everyone.

Quickoffice allows users to edit Microsoft Office documents no matter what hardware or software they're using. Though users won't have the same editing capabilities as they would when creating documents directly in Word, PowerPoint, or Excel, it serves to enable limited editing without compatibility issues. Sure, users can already edit Office documents on a mobile device using a Microsoft-branded mobile app, but they must pay for an Office 365 subscription in order to do so.

Quickoffice is just one among several free productivity suite options. Google already had its own Google Docs, a free mobile and cloud-based productivity suite. And Apple recently announced iWork would be free on all new iOS devices. And I've speculated that it could make sense for Apple to make iWork on new Macs free, too.

With free alternatives increasing, there are fewer reasons for consumers to subscribe to Office 365.

The Office Suite will never be free
Or it at least won't be free in the near future. If it were, Microsoft's operating income would plummet. Office is the company's biggest contributor to the bottom line, accounting for roughly $16 billion of its $27 billion in operating income last year.

Making the suite free would be operational suicide. The productivity suite is undoubtedly the industry standard, deserving of a price. If Microsoft was able to generate a whopping $16 billion in operating income on the suite last year, they have no reason to join in on the free craze.

That said, given the growing number of free alternatives, Microsoft's pricing power might face greater pressure going forward.

Microsoft Office's remaining strength
Among enterprises, Microsoft Office is the golden standard. Apple's iWork and Google's Google Docs are both aimed at consumers, not enterprises. While Google does have its Google Apps for Business to compete in the enterprise category, it isn't free -- so the competitive balance between enterprise solutions didn't change when Google made Quickoffice free.

But are Microsoft's enterprise customers enough to prevent mass adoption of alternative productivity suites? Definitely in the short run, but what about over the next 10 years? If these new free alternatives convince droves of consumers to make the shift over the coming decade, Microsoft's near monopoly on enterprise productivity software could even begin to shift.

Free is tough to compete with.

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