One of the biggest hopes of enterprise users everywhere is that Microsoft (NASDAQ:MSFT) Office will become available on Apple (NASDAQ:AAPL) devices through iOS, specifically on iPads. Much ink has been spilled on the topic, and Microsoft officials always seem to tap dance away from the topic. The simple truth is that Office is a huge point of differentiation for the software giant that gives its Surface Pro tablet a fighting chance. Equally obvious is the reality that, by keeping a full version of Office off of Apple devices, Mr. Softy is probably leaving a lot of money on the table. Ultimately, I think this is the right call if Microsoft really wants to compete in this arena.
The Surface Pro
Microsoft's second-ever computer offering, the Surface Pro -- which is really a PC-tablet hybrid -- may have received mixed reviews, but there's one point where no dissension existed: The ability to run a full version of not only Windows, but the Office productivity suite, was a critical advantage for the device. The Wall Street Journal's Walt Mossberg complained that the device was too heavy to be a "real tablet," and that it wasn't heavy duty enough to be a competitive PC. The New York Times' David Pogue called the device a game-changer, and noted that it had the potential to usher in a new era in computing.
One of the points on which the two agreed was that the inclusion of Office helps the device standout. Pogue asks: "Are you getting it? This is a PC, not an iPad." While Mossberg is less enamored with the device, he does concede that "the Pro is a serviceable laptop, especially since, unlike on an iPad or Android tablet, you can use full-fledged PC programs." The takeaway here is that the ability of Microsoft's devices to run Office allows them to stand apart. Taking this unique feature away before the devices have had time to gain significant traction would undermine this effort.
Earlier this month Adam Holt, an analyst at Morgan Stanley, estimated that the decision to forgo an Office release for iOS could be costing Microsoft as much as $2.5 billion in revenue:
Office on iPad could be a several billion dollar opportunity. While MSFT has resisted offering a full version of Office for the iOS, the company may ultimately decide there is more upside with Office on iPads, particularly if Win tablets fall short of expectations. The Surface RT likely sold only 900,000-1 million units in calendar Q4, while OEMs have pulled back on tablet builds and it may be difficult for MSFT to reach much more than 10% tablet share in calendar 2013.
Holt further notes that the numbers that Microsoft could achieve are even higher if the company would simultaneously release a Google (NASDAQ:GOOGL) Android version of the software. In certain ways, an Android release would make even more sense, as the company has seen much stiffer competition for productivity uses from Google Apps than from anything on iOS. While Apple offers various productivity applications like Pages and Numbers, most serious enterprise users prefer Microsoft or Google options.
Microsoft may app out
Another option that Holt explores is the possibility that Microsoft will focus its efforts on expanding its Office 365 apps for iOS and Android. This would allow the company to keep the programs from becoming native to these other operating systems, while still providing users with enhanced options over what is currently available. The multi-level approach -- offering a basic web option, an enhanced app version, and a full native version -- may give the company the ability to laser target its strategy. The risk, of course, is that if it allows too much functionality out of the barn, nobody will have any motivation to ever return to Windows devices. The decision remains a delicate balancing test between immediate revenue and creating a long-term, renewable revenue stream.
Ultimately, I think that the solution for software must lie in the cloud. This means that whatever solution Microsoft develops to maintain control over Office in an Apple or Google environment must reside in the cloud, and allow users to have some flexibility over what device they use. Conceding the war to win the battle would be a mistake, meaning a full version of Office for iOS should not be a near-term consideration. But the release of a version of Office 365 that can limp along on iOS and Android, and hum on Windows, seems like the best bet for the software giant. Microsoft has done an impressive job diving back into the fray and, as such, belongs in your technology portfolio.