In the early days of the iPhone and later the iPad, pundits and consumers alike questioned how useful the devices could be without Microsoft's Office productivity suite. For many, Word, Excel, PowerPoint, and Outlook are synonymous with business and getting things done. The iPhone launched over five years ago, and the iPad is coming up on three years, but in all that time they've yet to have an official Microsoft Office app suite, and with more than 100 million units sold each, sales have clearly suffered tremendously.
That's not to say that a solid word processor, spreadsheet cruncher, and presentation building app aren't essential for the platform - they are, and that's exactly why Apple built Pages, Numbers, and Keynote for iOS. Apple also sells the three iWork apps for $29.97 combined. That's ninety dollars less than the lowest available tier of Microsoft Office for PC or Mac, and that tier is intended for "home and student" use. It's another eighty bucks if you want a version meant for use in your business. The iOS iWork trifecta, however, continues to be less than thirty dollars, no matter what you intend to use it for.
To be fair, there's a fairly large and vocal contingent that insists they need Office. Numbers still isn't as robust as Excel (as any accountant will tell you), for one. But there's also a large institutional memory barrier to be overcome. Business believe that in order to conduct business, they need Office. That barrier is slowly coming down, one business at a time, with more and more picking up iPads in lieu of PCs.
With the iPad approaching its third birthday after completely turning the idea of what a tablet could be on its head while simultaneously and singlehandedly obliterating the netbook market, Microsoft finds themselves in an interesting predicament. Millions upon millions of iPad users have gotten by without Office, and they've flourished without Office. More and more, people are beginning to realize that they don't need Office to crunch numbers or draft documents or create presentations. With their email and contacts and calendar already in the cloud, they don't need Outlook.
Microsoft let a golden opportunity pass with iOS. For years and years they've managed to convince the overwhelming majority of Windows users that they need to have Office, and those customers have overwhelmingly ponied up for a license. Microsoft has profited mightily from this impression, with even Mac switchers being willing to plop down the extra cash to purchase a copy of Office for their new OS X machines.
But on iOS they have yet to have that opportunity. Hundreds of millions of iOS devices are out there, with not a single installation of Office in the public. Now, with Microsoft finally ready to roll out Office onto iOS, they've run into loggerheads with Apple over how much of a cut Apple should be able to take for sales made through the app. Specifically, Apple is keen to take a 30% cut of the sale price of any app sold through the App Store and 30% of any purchase made in that app using Apple's App Store backend - subscriptions included. The rules are the rules.
Microsoft's much-rumored Office for iOS is likely to take the form of an Office 365 subscription, which if purchased through Apple would result in a 30% commission for Apple into perpetuity, even if the subscriber switches to another platform (unless they opt to shut down their account and start from scratch - unlikely to say the least). Unsurprisingly, Apple's not budging on this. Not only have they made a lot of money off this model and stand to make even more off of Microsoft's work, but they don't need it.
In the early days of iOS, those questions of how well the platform could succeed without Office support were loud and ongoing. Had Microsoft launched Office on the iPhone and iPad early on, they could have furthered the impression that Office was a must-have for anybody serious about anything, even on iOS. But they let years pass, and now Microsoft's flagship applications aren't so must-have anymore and Apple isn't overly eager to accommodate them. It's easy to imagine that four years ago when preparing to launch the iPhone App Store Apple may have been more willing to negotiate with Microsoft to get flagship apps like Word and Excel on the smartphone. But today? Apple's doing just fine without them.
Apple doesn't need Office, and if they can't get past the issue of Apple's cut of revenue, then Apple will happily move on without Office. Apple is a "my way or the highway" company, and that shouldn't surprise anybody. Would Apple get additional App Store income and sell even more iPhones and iPads with Office available? Sure. But that's not going to happen if Microsoft isn't willing to accept Apple's terms.
One could argue, on the other hand, that Microsoft needs iOS. While the "Maybe I don't need Office…" effect is one that is obviously of great concern to Microsoft's cash cow software, the potential of that realization for potential customers leads to further realizations: "Maybe I don't need a PC at all."
Microsoft CEO Steve Ballmer is betting the entire company on Windows 8, Windows RT, and Windows Phone. They've finally recognized that mobility is the future and they've built two-and-a-half operating systems that embrace that future. Windows RT and Windows Phone both come out of the box with Microsoft Office, an implicit admission that Office is a selling point for customers.
Office is synonymous with Windows in the minds of many, and once they realize that they don't necessarily need Office, then they don't need Windows either. By letting the world's most popular smartphone and tablet go for all these years without Office and giving Apple long enough to cement the stronger negotiating position, Microsoft's sacrificed the opportunity to breed another generation of users who absolutely, unequivocally, must have Word, Excel, Powerpoint, and Outlook. And that could very well be Microsoft's undoing.