Wednesday, February 22, 2012

The enemy of my enemy, take two

This week there's been a back-and-forth over screenshots that may or may not show Microsoft Office running on an iPad. Microsoft has denied it, but in carefully-couched words that to some eyes read more like a non-denial denial.

M.J. Siegler thinks that Microsoft is putting Office on the iPad as the ultimate screw-you to Google: the iPad is already far more popular than any Android tablet out there (even the quasi-Android tablet known as the Kindle Fire), and with Office it would also be far more useful for business users. Android in the tablet space would be left with very few selling points -- and remember, this is a platform that's already struggling to find a strong connection to customers. Android on a smartphone benefits by the sales muscle of carriers and device manufacturers; Android on a tablet has to sell on its own merits, and so far it's mostly failing that test. If Office is exclusive to the iPad (and Win 8 tablets, when they come out) that might just about do it for Android in the tablet market.

FastCompany has a piece on why this move, as satisfying as it might be, would put Microsoft in a very difficult situation. Briefly stated, Microsoft has three primary options, none of which is appealing:

  • They could bring Office to the iPad and price it at competitive levels to comparable apps on the platform. Apple's own productivity suite costs about $10/app, so the Big Three of Office (Word, Excel, and PowerPoint) could logically be priced at a collective $30. This poses a serious problem, though: Microsoft Office for the desktop will run you $149.99 retail (or $123.49 if you buy it through Amazon). 
  • Alternatively, they could protect the price structure of Office in one of two ways: either by offering a full-featured tablet version at $50/app (absurd on its face) or by presenting the tablet version as a stripped-down, "Lite" version of Office optimized for touch input but missing some core features. That, though, causes them problems down the line when Windows 8 comes out on tablets. If the tablet version of Office that comes pre-installed is not a true version of Office, why would you buy that tablet? 
  • The third option is no option at all: argue that Office requires a keyboard and mouse, and limit any tablet app to the sort of "view and annotate" versions we've seen on handheld devices before. This would almost certainly have the effect of convincing more and more consumers that they don't really need Office, as they try out tablet-based Office alternatives and find that they can actually get their work done that way, too.
This is a real problem for the company. Microsoft cannot hope to sit out the tablet revolution and still prosper going forward, but by the same token they can't sharply cut prices on the tablet version of the software with which they've printed money for decades now and hope that customers won't expect price cuts on the desktop side as well. A lower-priced desktop version of Office might sell like hotcakes, but it's very possible that even so Microsoft's bottom line would suffer.

In the end, this dilemma could prove to be Ballmer's true legacy. He's managed the company through a long profitable period, but he also mocked the iPhone and iPad when they came out. Clear vision would have recognized strong competition when he saw it; strong leadership would have had the company already building for new markets, rather than focusing on wringing every last cent out of the markets they already occupied. If Ballmer can find a way out of the mess he's at least partly created, I'll owe him an apology; in the meantime this will be a very interesting drama as it unfolds.