Zoho and Google both have offered free office suite for years, and today, Apple announced that their office suite will also be free across all Apple devices.
Given that Microsoft Office has long been the de-facto monopoly, none of our three companies have anything to lose in commoditizing the office suite market. That is the nice thing about facing a monopoly in an adjacent market – every player other than the monopoly would win if they get a non-zero share of a massively shrunk market. If the $20 billion market shrinks to $2 billion, we at Zoho would celebrate it, as long as we can hope to get a share of that shrunken market. In fact, competitors would win even if they don’t get any share of the shrunken market, because it denies the monopoly the ability to use its cash cow to dominate adjacent markets they do have an interest in.
That very same dynamic has played out in the operating system market already. The near-zero revenue share that competitors to Windows had meant that Google and Apple could give away their operating systems (which Apple also announced today!) and not have anything to lose. What Google achieves with the $0 ChromeOS license it charges OEMs (which costs Google exactly $0 in foregone operating system revenue) is that the OEM will now turn around and ask Microsoft for a $0 Windows license.
What OS X, iOS, Android and ChromeOS have collectively achieved is to drive Windows market share to under 25% of all client devices and yet, these alternative operating systems derive near zero revenue in and of themselves.
There is really not much Microsoft can do to fight back to stop the erosion of these core franchises. Their traditional weapons – closing the document format; tying the Office suite closer to Windows – none of these weapons work anymore. Today, for the first time in a couple of decades, Microsoft faces serious competition in Office, from competitors who, for their own reasons, all want to tear down the monopoly. Why do Apple or Google or Zoho all want to commoditize Microsoft Office? Each company has its own reason: Apple wants to add value to its world-class devices, Google wants to extend the reach of its web services, and for Zoho, the Office suite is one part of our broader work-oriented application suite. As I have argued above, underlying these different strategies is a more fundamental reason: why not tear down a market where we face a monopoly? Apple would want to stop Microsoft from being able to leverage the Office franchise and money into tablets and smart phones, Google would want to stop Microsoft from being able to pour money on Bing indefinitely and so on. Bill Gates would know what it means to “cut off the oxygen supply” – after all it was a phrase he invented while finishing off Netscape. Apple and Google recognize, just as we do at Zoho, that the $12+ billion in oxygen (aka operating income) that Microsoft Office contributes to the mothership is now extremely vulnerable.
The Windows and Office monopolies have massively incentivized the broader ecosystem to come up with business models that drive down the value of those core Microsoft franchises to near zero. This is the price Microsoft has paid with its profoundly anti-competitive tactics of the 90s – every single player in the ecosystem, from their once-slavishly-loyal OEMs to would-be competitors all want to see their market shrunk to zero. Microsoft has punished itself more than the Justice Department could ever have done.