Word Up – Office for iPad?

This is something I wrote for my company’s blog, which was published yesterday:

In the past weeks, Microsoft has released a slew of iOS apps, including SkyDrive (with 25 gB of free online storage), OneNote for iPad, Halo Waypoint, and My Xbox LIVE, Lync 2010 for iPhone and Lync 2010 for iPad, in addition to previous releases like Bing, Photosynth, and OneNote for iPhone.

And there are strong rumours that Office for iPad is in the works. With Windows 8 tablets like to appear at some point in 2012 and Windows Phone 7 already in the market, the big question is why would Microsoft bolster its rival’s business by offering products which may keep them away from its own devices? At first glance, it looks like madness.

But Microsoft is a software company first and foremost (notwithstanding their excellent range of PC mice & keyboards, and the XBox business). 90% of their revenues comes from software, so it makes sense to put its software on as many platforms as possible. Right?

Well, kind of. Most of those apps are free (OneNote allows 500 free notes, then it costs £2.99), so there’s no revenue attached. But there’s huge value in user data. By putting apps on to the only tablet with any significant market scale and tying them back to online services they get to see exactly how users behave. It’s like a giant user testing laboratory and Microsoft engineers will use that information to figure out the best implementation of their apps on their own tablet version. Putting XBox LIVE on iOS extends the platform onto the world’s most popular handheld gaming device.

But those arguments don’t hold true for Office. The two cornerstones of Microsoft’s business are the revenues it earns from its Office and Windows franchises. Nothing, but nothing, is allowed to compromise that. Ever.

Although there is a huge and flourishing market for premium (i.e paid-for) apps on iOS, price expectations are set pretty low. Even for iPad there are few apps priced over £9.99. Apple’s own iWorks app (Pages, Keynote and Numbers) cost £6.99 each. Even with their larger feature sets it’s hard to see how Microsoft could charge anywhere close to the current lowest price for Office on Windows or Mac (the Home & Student edition is £72.99 on Amazon; the business edition is £100 more expensive but includes Outlook). 

So Microsoft has to make a judgement call – will Office for iPad sales be additive to desktop sales, or cannibalise them? And would a lower price on iPad exert significant downward pressure on Office prices for PC, even if the tablet versions are functionally limited? 

My best guess is that there may well be more iOS apps from Microsoft through 2012, but we won’t be seeing Office for iPad anytime soon. The risk to core revenues is simply too great. Those looking to move their entire working lives to iPad will have to wait a little longer, or explore the non-Microsoft options.