Microsoft's move to make its Office apps for Android and iOS free for consumers is not surprising at all. The software heavyweight is simply reacting to consumer demand, which is increasingly shifting its sights away from desktop to mobile.
Analysts believe that Microsoft's decision to make Word, Excel and PowerPoint for the iPad and iPhone and their Android counterparts is mostly due to the fact that limiting the functionality of these apps did not provide enough incentive for users to purchase an Office 365 subscription so they can do more than view their documents on their tablets and smartphones.
With the presence of free and viable alternatives that let users view and edit their documents on their devices, such as Google Docs, Sheets and Slides and Apple's suite of iWork apps, there is really no reason for consumers to spend $70 to $100 a year to buy Office apps when they can do the same thing using other productivity tools.
"Microsoft is feeling pressure from the bottom end of the productivity market," says analyst Wes Miller at Directions on Microsoft. "In reality, they are doing this because of low uptake on consumer Office 365."
Jackdaw Research's principal analyst Jan Dawson estimates that Microsoft made a total of $24 billion in revenue from Office, both from Office 365 subscriptions and perpetual licensing sales. Only $3 billion, or less than 13 percent of the total amount, comes from Office 365 subscriptions, he says.
Although Microsoft gained an additional 1.5 million new subscribers during the third quarter, its revenue per customer from Office 365 subscriptions actually fell by 18 percent, indicating that subscriptions were for the lower-priced Personal versions.
Analysts previously lauded Microsoft's move to dangle the Office 365 carrot to users who downloaded the view-only Office apps. However, as consumers are turning out to be unwilling to lay their money down for the premium apps, Microsoft is making a quick, smart move to make the most of the situation.
Pat Moorhead of Moor Insights & Strategy believes making Office apps free for consumers will encourage consumers, who have been long used to the Office ecosystem, to stay on instead of moving over to the competition.
Since consumers' expectations usually translate over to the workplace, the move to make Office free and, therefore, ubiquitous could end up being profitable for Microsoft's suffering bottom line.
"The BYOD (bring your own device) play is critical, and because Microsoft has the ability to leverage on other platforms what people access at work, it can force enterprises to pony up for access [to Office] on employees' devices," Moorhead explains. "That's the real revenue maker for Microsoft."
