Just a few years ago, giving away a full free version of Office would have earned a Microsoft chief executive a visit from a witch doctor. Now, the move is following through on the rallying cry coming from Satya Nadella, Microsoft’s new chief executive, who has pushed cloud and mobile computing as lodestars for the company’s future.
The old Microsoft hemmed and hawed about creating Office apps for mobile platforms from Google and Apple, pushing its Windows platform instead. But the center of gravity in the tech industry has quickly shifted to mobile and cloud computing. And the company’s about-face comes after rivals like Apple and Google and many of the most successful new start-ups offered free software, often with premium perks for sale.
“Lots of consumers don’t need a PC,” said Rick Sherlund, an analyst at Nomura Securities. “They just need an Internet connection. They don’t need Office as much.”
That reality has started to weigh on Office. While sales of the software to businesses grew about 8 percent last year, consumer revenue rose only 2 percent. Sales declined by double-digit percentage points during the first two quarters of the year.
The Office business suffered in recent years from a global slump in sales of PCs, which were hurt as people began to do more and more basic computing chores on tablets and smartphones. For years, Office was not available on mobile devices, and many consumers began to wonder whether they needed the software at all. Those who needed productivity apps turned to free or cheap alternatives from Apple, Google and start-ups like Evernote.
The outlook for Microsoft’s apps has improved in recent quarters with the growth of Office 365, a cloud version of the product that includes constantly updated apps, unlimited online file storage and free Skype calling to traditional phones. Consumers pay $7 to $10 a month for the service, rather than buying a copy of Office for about $150.
“We’d like to dramatically increase the number of people trying Office,” John Case, corporate vice president of Office marketing at Microsoft, said about the new offering. “This is about widening the funnel.”
A version of Microsoft Word, featuring review tools, for the iPhone.
Microsoft started to suggest a more open posture earlier this year, when it released an iPad version of Office that could be used to read documents, spreadsheets and presentations.
If users wanted to edit or print those documents, though, they needed to pay a subscription fee to Microsoft. Now Microsoft is doing away with those hindrances. It is starting to test similarly full-featured and free Office apps for tablets running Android, Google’s mobile operating system. And it is updating Office apps for iPhone to allow editing, at a time when Apple’s new big-screen smartphones are making it easier to get work done on the devices.
Microsoft says it has more than 7 million consumers subscribing to Office 365. It says there have been more than 40 million downloads of its Office apps for the iPad. In its
most recent quarter, which ended Sept. 30, Microsoft said its consumer Office revenue grew 7 percent.
By making an unabridged version of Office available for free on mobile, Microsoft is betting it can get even more people to start using the software, without stealing sales from the PC and Mac versions of the product, where it still makes truckloads of money.
The calculation is similar to the one made by software makers in the mobile industry. Instead of the one-time fees long associated with software sales, most app makers give away basic versions of their products — from games to productivity software to online storage services — while charging for premium features.