Microsoft announced on Thursday, November 6, a major change in its pricing policy by providing free one of its flagship products for smartphones and tablets: the Office suite, which includes text processing Word, Excel spreadsheets and PowerPoint presentations.
The shift is dramatic insofar since Office, with its billion users, is one of the milking cows in the group. Over the year 2013, it represented a third of the revenue of Microsoft: about $26 billion out of a total of $87 billion. The group does not publish details of its profits by product, but from Word, Excel and PowerPoint in terms of profitability it is probably even higher.
So far, a non-professional client wanting to have Office on their smartphone or the tablet had to pay an amount of $70 (57 euros). Now, the software suite will be free in its basic version. “We try to put Office in the hands of many people, regardless of the device,” says John Case, head of the Office of Marketing. Users of a PC or a laptop on the other hand will continue to pay to have these services. The products will also remain paid on smartphones and tablets for business customers.
This movement is part of the strategy defined by Satya Nadella, Microsoft’s new boss, who decided to make mobile devices and cloud computing as a priority. The group took the decision, while sales of Office began to show signs of slowing. If the professional version was up 8% last year, the increase was only 2% for the consumer version. It was worse in the first two quarters of this year, with the sales going down. The evolution of this market is in a context of declining PC sales in favor of tablets and smartphones on which Office was not available for long. Users who still need these tools have begun to turn to Apple (with Numbers and Keynote) alternatives, Google (with Docs and Sheets) or by startups like Evernote, which showed the immense advantage, in addition, to be free in the basic version.
For Microsoft, the first strategic move was announced in March with the launch of an Office application for iPad. Today, the group boasts more than 40 million downloads of its Office applications for the Apple tablet. As for the general public Office version 365, it has more than 7 million subscribers against 1 million in June 2013. As a result, sales of its consumer software rose again (7%) between July and September. On Thursday, the group also announced the launch of a version adapted to iPhone, as well as for devices using Android, the Google operating system. A few days ago, Microsoft also created a partnership with Dropbox, allowing users to fetch their Office documents directly in its storage service. In addition, the group announced that it in spring would make available to hardware manufacturers integrating some versions of Windows with 9-inch screens, another cash cow for the group. The goal is again to catch up in the mobile sector.
By making Office free of charge for mobile devices, Microsoft takes a measured risk. It is the challenge of increasing the mass of users on mobile without really altering the income generated by computer users who still carry the bulk of sales. On the other hand, the professional version of Office, which remains charged for, continues to represent 90% of the turnover of the software suite. The Cultural Revolution that compares the present-day Microsoft to its era of Steve Ballmer, the predecessor of Mr. Nadella, is but an illusion.