Microsoft dips toe in Office unbundling water

Strips some pieces from Office and offers them separately to boost revenue, says one analyst; another counters that there's no sign of a strategic shift

Microsoft is unbundling chunks of Office, including a rumored free OneNote client for the Mac, as part of a strategy to reach customers who can't stomach the idea of paying for the full-fledged suite, or who have opted for free or inexpensive alternatives, an analyst said today.

The unbundling strategy runs counter to Microsoft's usual practice of adding components to the Office suite, illustrating the push-pull that the company struggles with as it tries to be everything to everyone, whether consumers or commercial organizations.

"What we'll find is that Microsoft unbundles to some degree, but we are also going to see tighter consolidation," said Wes Miller, an analyst with Directions on Microsoft, a research firm that focuses on Microsoft. "There are a couple of end-games [at play] here. Microsoft will continue to be mindful of all these moves [to unbundle], but at the same time it will continue [to stress] that Office 365, including the desktop applications and its separately-available services, is best as a unit."

A pair of recent moves, one rumored Wednesday, the other announced by Microsoft last week, symbolized the unbundling of Office.

According to multiple sources, including The Verge and ZDNet, Microsoft will launch a free desktop version of OneNote for Apple's Mac personal computers later this month, and also drop the price to zero of the existing desktop version of OneNote for Windows, which is part of the Office 2013 suite (and sold as a separate app for $70).

OneNote is Microsoft's note-taking application, a market that Evernote dominates. While OneNote apps have been available free of charge for iOS, Android and Windows 8.1's "Metro" UI, it has never been ported to OS X or offered free of charge on Windows traditional desktop.

And earlier this month, Microsoft said OneDrive for Business, its enterprise-grade online storage service from Office 365 and SharePoint Online, would be available as a stand-alone, with prices starting at $5 per user per month for 25GB of space. OneDrive for Business was formerly called SkyDrive Pro.

The new separate offering of OneDrive for Business targets companies that rely on on-premises Office and back-end server software like Exchange and SharePoint, but nonetheless want cloud-based storage options.

Microsoft's unbundling moves appear part of a broader trend in technology that analysts have spotted at work. Facebook has been the most-cited example, as the social networking giant has faced intense competition from smaller rivals that focus on just one aspect of Facebook on mobile, such as photos (Instagram) and messaging (WhatsApp and a host of others). Facebook has countered by doing the same, splitting Camera and Messenger out as unbundled mobile apps, but with less success.

"The primary threat [to Facebook] posed by all of these apps is unbundling," said Benedict Evans, then an analyst with Enders Analysis, now at venture capital firm Andreesen Horowitz, nearly a year ago. "Apps may actually be just as big a problem for Facebook, both because they enable competitors, and because they might erode the actual use cases that make Facebook money."

Some, including Evans, see a similar unbundling threat to Microsoft's do-almost-anything Office from others' tablet apps and services.

If Microsoft viewed the landscape in similar fashion, it would make sense for the company to launch a preemptive strike before potential rivals start eating into Office's revenue by unbundling parts of the Office portfolio.

Miller didn't see signs that Microsoft was spooked and acting proactively, but acknowledged that the unbundlings were revenue driven.

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