Buried in the hype of the iPhone 5S/5C launch, Apple is now bundling in its iWork applications with the purchase of a new iOS device. Is it any coincidence this comes as Microsoft has beefed up its Surface 2 software with an Outlook-enhanced Office 2013 RT and Google offering its Quickoffice mobile app for free? Fundamental applications to create and edit documents that once cost hundreds of dollars are now table stakes in a larger move to capture market share.
The holy trinity of productivity applications for nearly 30 years has been word processing, spreadsheet and presentation software, with Microsoft Office dominating the field with Word, Excel, and PowerPoint. Later, Microsoft added Outlook to handle e-mail, to-do list and calendar functions – and charged royally for a full Office bundle, raking in hundreds of dollars per copy and more with every upgrade.
Contrast today's $449.00 price of the Surface 2 tablet – hardware and bundled software – with the several hundred dollars to get the "core" Word/Excel/PowerPoint software. Even today, Office Home & Business 2013 with Outlook licensed to one PC costs $220.00. One might argue that Surface 2 hardware "costs" $230 with a $220 software license bundle.
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Microsoft now offers Office 365 as a subscription service covering up to 5 PCs for $99.99 a year – but even that may not be enough, given Apple and Google now promoting free tabletware. In theory, Microsoft could extend bundling and/or discounted prices to PCs, but it will likely continue to milk stand-alone PC hardware for as much cash as it can. On the other hand, the company could also offer an Office discount to PC owners who have purchased a Surface tablet, providing a near-term incentive for customers to stick with Microsoft products.
Apple's move to bundle iWork with IOS isn't that radical. Apple was getting $10 per app from its Pages, Keynotes, and Number piece while being whittled away by Quickoffice when people had to pay for it. Since Google is now offering Quickoffice for free on Android and iOS platforms, iWork's revenue stream was destined to decline while Google continued its long-term process of getting the world to migrate to its ecosystem.
Over the long-term, I'd give an advantage to Google in terms of securing market share, since it can pick up PC and tablet customers using either Apple or Android devices. Apple will always have its hardcore following with Macintosh desktop and iOS mobile devices, but that doesn't translate into dominant market share unless it starts displacing PC desktops with Mac – a task it isn't working on today.
Microsoft has the most difficult task, as it has to juggle declining revenues from its core Office suite while trying to keep and secure customers into its ecosystem of software and services. Its biggest advantage is its established position in the SMB and enterprise sectors as a trusted and responsive vendor and a legacy software base of thousands of programs across an array of vertical markets built to run on the Windows operating system.
But, as evidenced by the fall of BlackBerry, there are no guarantees for any company over the long run. Apple, Google, and Microsoft have enough sheer mass and cash flow that they can afford to make mistakes that would kill lesser companies, but they cannot afford to make a series of mistakes that would erode their existing customer bases.
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