Microsoft's task: Sorting, tossing Office features
What Microsoft puts in its upcoming touch-based Office suite will be a huge test for the company, analysts said.
"There's really nothing out there in the mobile world that provides anything near the power of Office on the desktop," said Ross Rubin of Reticle Research in an interview last week. "It will be a massive challenge to preserve even the majority of that functionality."
Microsoft has said it will release touch-enabled versions of the primary applications in Office—Excel, Outlook, PowerPoint, and Word—but has provided no clues of what that suite will be like. Nor has it disclosed a timetable for the touch-based suite, although rumors have pegged a ship date in the first half of 2014.
"We are working on touch-first versions for our core apps in the Office suite, Outlook, Word, Excel, PowerPoint, and we will bring these apps to Windows devices, and also to other devices ... at a proper timetable," is the most that company executive Qi Lu, who leads the Applications and Services Group, has said publicly.
CEO Steve Ballmer, who will retire after the company appoints a new chief executive, has promised that the touch Office will come first to Windows 8.1 and only later to other platforms, including Apple's iPad.
The timing may be secret, but the chore Microsoft has in front of it is not: It's massive, as Rubin asserted.
Deciding what stays and what goes will be crucial to how customers perceive the touch Office, whether as a replacement, more or less, for the powerhouse desktop applications that are familiar to millions; as companion to the desktop; or as fit only for casual use and users.
"It will be challenging to translate much of the advanced functionality of Microsoft Office into touch apps," said Al Hilwa of IDC, echoing Rubin. "I think most of the focus is going to be on light editing such as might be done on a tablet, versus playing around with Excel filters or pivot tables, for example."
Mobile apps, like those envisioned for Office on tablets—including Microsoft's own Surface 2 and Surface Pro 2—typically boast a scaled-down feature set compared to desktop counterparts. Microsoft will either have to ditch swaths of features or devise a user interface (UI) that can hide most functionality at first glance, but still give users a way to find tools when they're needed.
The Office "Ribbon" UI—which debuted with Office 2007 to some disgruntlement—may be one way the touch apps can mask complexity. "But the change to the ribbon [in Office 2007] is pretty small potatoes to what a mobile Office will have to accomplish," Rubin warned.
Analysts don't doubt Microsoft's development acumen, but they wonder what choices the company will make, and how that will translate into customer reception. The latter is important because Office is important, not only to businesses worldwide, but also to Microsoft's bottom line.
A stripped-down touch Office—Hilwa's bet—would be impossible to sell at the same price point as the full-fledged desktop version, even if there wasn't enormous downward pricing pressure in mobile overall. Paid mobile apps seem to be fading, largely replaced by the "freemium" model, where the app is free and developers earn revenue from in-app purchases for additional features or tools.
So far, Microsoft has tied Office on non-Windows platforms—the versions it launched last summer for Android and iOS—to its Office 365 subscription plans, which start at $100 yearly for consumers, and $150 to $264 per user per year for businesses. Its strategy is to push Office 365 adoption by dangling the carrot of Office on mobile devices.
But Rubin saw the Office 365 linkage as an artificial check on sales potential, and believed Microsoft would sell touch Office differently.
"I think, eventually, Microsoft will have to release native [Office] software," said Rubin, meaning minus the Office 365 connection. "Maybe they'd even release a free, or very low price app ... then offer in-app purchases for additional functionality." Rubin pegged the maximum price at $60, less than half that of the entry-level SKU, Office Home & Student 2013, not much more than half a year of Office 365 Home Premium, the consumer-grade plan. But he wondered if even that was too high.
Another analyst wasn't as sure. "Microsoft will invest in those who want to pay real money for the features available in Office," said Jack Gold, principal analyst at J. Gold Associates, "and point everyone else to online versions."
Future pricing plans
Microsoft currently offers Web-based versions of Word, Excel, and PowerPoint free of charge, and uses them as the foundation for its lowest-priced Office 365 plans ($4 to $8 per user per month), which also feature hosted email and other Internet services.
A touch Office faces competition from two of Microsoft's biggest rivals, Apple and Google, which each now offer substitutes—iWork and Quickoffice, respectively—free of charge to either new device buyers (Apple) or everyone running Android and iOS (Google). While those free alternatives cannot compete with the current desktop Office, they may be competitive with a feature-limited touch-based Office, backing Microsoft into a monetizing corner.
There's a lot at stake. Office generates billions in revenue for Microsoft each quarter—$6 billion in the most recent, or 32 subscription of total company revenue—and with the serious slump in PC sales and the concurrent climb in tablets, a touch-enabled Office will be increasingly important to Microsoft's future.
"[Google's latest move with Quickoffice] is an example of the price Microsoft has paid by not having a touch-based Office," said Rubin, referring to Google's move last week to include Quickoffice with "KitKat," aka Android 4.4. "Not having a touch-optimized Office detracts from the experience [of Windows on tablets].
"But there's great potential upside for Microsoft as well," Rubin continued. "If they can turn Office with touch on Windows into a powerful productivity suite, then having [that] could be a huge advantage. It all depends on how Microsoft executes."