I can’t believe I am saying this, but I really think that Microsoft is reinventing itself and is well on its way to becoming a ‘cool’ company all over again. Remember Steve Ballmer’s talk about the iPhone at the time of its launch? That is the image of Microsoft etched in my mind, the big bully in the software industry, milking away its customers in a near-monopoly desktop software market and arrogantly dismissive of competition. But then came the cloud, and Microsoft, like many of its peers, was confronted by a rapidly changing marketplace, novel and definitely cheaper product consumption models and newer competitors that made it look like the IBM of the software industry.
All these seem to be changing now. In July 2014, Microsoft came out with the new Office for iOS integrating desktop productivity with iOS aesthetics, allowing users to read documents on iOS devices for free. However, in order to create and edit documents, one needed the Office 365 subscription that cost $9.99 a month. Within 3 months of doing this, Microsoft took another bold step forward, offering full functionality Word, Excel and PPT for free to iOS users. This move by a company that firmly believed in no free lunches, a company that was contemplating a price of about $50 – $60 for Office for the iPad just a couple of years back. Since then, Microsoft has made a number of announcements – a promotion for Office 365 at $6 a month for OneDrive users and the latest one offering 100 GB of free OneDrive storage to Dropbox users for a year and for two years for those that sign up to its Bing Rewards program.
What drove this change of mind? The steady decline in MS Office revenues for one. Also, Microsoft was forced to playing catch up in both the cloud and the mobile markets. Its attempts to push Windows-based devices as an alternative to Android and iOS were not paying off. Satya Nadella who succeeded Ballmer as the CEO is a strong advocate of the mobile-first and cloud-first philosophy. However, in order to walk the talk, he also realizes that the company’s thinking needs to go through a paradigm shift. The cloud market demands a very different type of business model, and a dramatic shift in approach from a vendor that is used to realizing profit margins of more than 60%. Microsoft needs to garner mind share among cloud and mobile users and the quickest way to achieve this is to offer some of its products for free on the most popular cloud/mobile platforms. I have no doubt that the number of people using Office on iOS devices has jumped by a few million since the apps became free. I am sure today’s announcement will also boost One Drive users to a great extent.
More significant is the fact that, for the first time in years, Microsoft is not reacting to competitive moves in the cloud market. It is the aggressor now, surprising competitors and analysts alike with a strategy that is so not like Microsoft. However, as a user, I should say that I am beginning to like what I see. I just hope that this change is for the good, for both Microsoft and its customers.