As many of you know, Microsoft recently announced that the mobile (phone & tablet) versions of the Office Suite will now be free. Microsoft previously had free mobile versions for some of the mobile platforms, but they were severely limited in functionality. There will now be free versions available on all key platforms–alleged with good functionality. However, there will be features that you need to upgrade to paid versions to get access to–thus the “freemium” strategy.
B2B Freemium–a good idea in general?
I’ve previously written a more in-depth article on the Freemium business model in general. If you’ve taken a look at that article you’re aware that I’m not a huge fan of Freemium models for B2B markets. The reasons for my dislike are many and varied, including but not limited to: A) conditioning the market that “free” is the appropriate price, B) the reduction in value perception of your paid versions and C) the difficulty in choosing the free features vs. those that require payment in order to maximize revenue. As I wrote in my previous article I prefer this model more frequently for products in B2C markets than B2B. But there are definitely B2B market conditions which lead to Freemium as an appropriate and possibly the preferred model.
Every situation is different and needs to be evaluated as such
As I wrote in the previous article, the devil is definitely in the details when discussing Freemium. Every situation is different and it’s important to consider the unique circumstances of a market segment at a point in time, before making a business model decision as important as this one. The key circumstances that sway which way my opinion goes in this case are the following:
- The general model for software on mobile platforms is “free or cheap” for base versions. There are of course many exceptions, but most revenue in mobile is made either via a) advertising or b) add-on features to a free base product.
- Google, Apple and a gaggle of startups have been “eating Microsoft’s lunch” for years with modern business models that have seriously chipped away at the MS monopoly. This has the effect of getting people used to using alternative free/cheap apps, which will eventually endanger even the core Microsoft businesses.
- Microsoft appear to have set up appropriate pricing “fences” between free and paid versions. The mobile versions that features most important to business (including security) must still be paid for, effectively putting any large company-based usage in the paid camp. Probably the biggest fence of all is that the PC and 365 Subscription applications-which is where most people still do serious content creation– will still be paid versions.
While there are sound reasons listed above as well as others to make this move, there is also definitely some potential revenue loss from this move by Microsoft. There will be many professionals (especially in SMBs) that previously would have paid for mobile software who may now find the free versions perfectly adequate for their needs. And the free tablet/phone MS Office apps may even be capable enough that it will accelerate the phenomena of “cutting the cord” from the PC-based Office applications entirely.
What Microsoft can accomplish with this move
The biggest thing the folks in Redmond can accomplish by this bold, aggressive action (by Microsoft standards) is to buy themselves some time. While there will be some additional revenue leaks created by this move as I discussed above, this strategy has the potential to significantly stem the ongoing momentum away from their business application platforms. Current Microsoft users will no longer be forced on mobile to choose between a) what they perceive to be “paying too much” relative to alternatives if they want to continue to use the universally understood MS interface or b) switch to alternate, unfamiliar products which aren’t as well integrated from a data perspective.
This is important because–let’s face it–Microsoft’s user experience isn’t the most elegant that was ever created. Once people make the switch, they’re not coming back. But the Microsoft interface is so universal and folks have become comfortable with it. Once most users become comfortable in a serious application, they’d prefer not to make a switch unless something forces their hand.
As a result of this announcement, I believe this may really slow down the trend of leaving the Microsoft platform, by allowing many professional and consumer users who might otherwise be tempted to switch to a lower/no cost solution to utilize the Office tools on mobile without additional cost. While it may not be obvious on the surface, the most important effect of this move may be to protect the bulk of the huge PC-based revenue base, at least in the short to medium term.
This move doesn’t fix their long-term problem–the very difficult “shrinking snowball” problem of trying to create new revenue streams faster than their huge legacy business decays. Not by a long shot. But I believe it will buy them some time in that regard to try new things to figure that out.
This move looks bold but was probably long overdue
My bottom line is that this is a move that isn’t without danger–but I also believe it’s the right thing to do. Microsoft is still a huge and wildly profitable company with dominant market shares. Having said that it may seem strange to read the following–but the writing is already on the wall for this company and it isn’t a good on that wall. MS may have already missed the major recent inflection points of the software market. This new mobile strategy may actually accelerate the erosion of their revenue and profits. But it also serve as one of the first real steps toward getting them “back in the game”. It’s too early to say for sure, but on balance I like the move. It’s probably one that should have been taken several years ago.
What your opinion on Microsoft’s big announcement? Post a comment with your view.