MS-Office in the Workplace

Just for the record.

I’m working with a company that made headlines in 2012 with the announcement that it will be moving close to a hundred thousand employees to Google Apps.

Guess what format they send stuff to me in now.

Pure MS-Word and MS-Excel.

It’s not even in .docx or .xlsx but in the classical .doc or .xls formats which Google Apps no longer supports.

I suppose that even as they moved to Google Apps, they kept MS-Office around to communicate with the outside world.

Making Office Dramatically Better: Bill Gates

In an interview with Erik Schatzker of Bloomberg TV, Bill Gates gave his idea of what Microsoft’s priorities should be;

Certainly, Microsoft should do as well or better, but of all the things Microsoft needs to do in terms of making people more productive in their work, helping them communicate in new ways. It’s a long list of opportunities Microsoft has to innovate, and taking Office and making it dramatically better would be really high on the list, that’s the kind of thing that I’m trying to make sure they move fast on. I’m very happy with what he’s doing. I see a new sense of energy. There’s a lot of opportunity there. Some things the company isn’t the leader on, and he sees he needs to change that.

So Bill Gates is prioritizing MS-Office.

Why?

Jan Dawson has been giving us quite a few good posts on Microsoft, and had this to say in his post on Techpinions.

In short, if Microsoft is to compete effectively on a third party basis, its services on competing platforms have to be so good they can overcome the price/business model disadvantage, the lack of integration, and its far smaller mobile device installed base. As of right now, Microsoft simply doesn’t seem to have any products or services that can do that successfully and this should be a key area of investment. In the meantime, it’s being successful largely with products it’s unable to monetize from most users, such as OneNote and Skype.

Jan’s discussion is that Microsoft can no longer rely on it’s own platform (Windows), but must now win by providing software and services for third party platforms. That is iOS and Android. Whereas both Apple and Google can and do provide software and services for free due to their different business models, Microsoft’s business necessitates that they charge for MS-Office. Hence MS-Office must be well worth the price.

I think Jan Dawson and Bill Gates are in complete agreement here.

Chromebooks in Europe

Samsung recently announced that they will exit their laptop business in Europe. This includes both Chromebooks and PCs running Windows.

Of course, you don’t usually exit businesses that are doing well. Samsung gave the following reason in their statement;

We quickly adapt to market needs and demands. In Europe, we will be discontinuing sales of laptops including Chromebooks for now. This is specific to the region — and is not necessarily reflective of conditions in other markets. We will continue to thoroughly evaluate market conditions and will make further adjustments to maintain our competitiveness in emerging PC categories.

Essentially they are saying that their laptops are not selling well and Europe, and it doesn’t make sense for them to continue that business there.

This would be understandable if this was driven mainly by lackluster sales of Windows PCs. IDC has predicted that worldwide PC shipments will decrease by -3.7% in 2014. However, Samsung in not strong in this segment. The segment where Samsung is strong is in Chromebooks. Although Acer has recently been reported to have edged out Samsung, it is still a strong second with an estimated 24% market share of Chromebooks shipments. This segment, unlike the Windows PC segment, is predicted to show very strong growth in 2014. The fact that Samsung is exiting the European market not only for Windows PCs, but also for Chromebooks, suggests that at least in Europe, Chromebooks may be struggling.

Most news coverage on Chromebooks come from the US and as usual, both Google and Samsung are very quite about actual sales. Most analysts tell us that Chromebooks are selling well in a single niche market, that is US education, and hence it is not a surprise that Chromebooks do not yet have much traction in Europe. However, they seem to be a bit more optimistic on the prospects long term.

However, the news from Samsung suggest that they do not expect Chromebooks to catch on in Europe, at least not in the mid-term (3-5 years), which would be the minimal window for which such a drastic action would make sense.

Of course, this makes a lot of sense. Although I do not have any figures, I strongly suspect that the amount of money that US schools spend on technology vastly outweighs what other countries, even developed nations spend. Hence it is very unlikely that the single niche that Chromebooks has found success in (US K-12 education) even exists outside the US.

Windows is Cheaper Than Android

I have written quite a few posts on the topic of how Android hardware OEMs are losing their position inside the value chain.

  1. Android OEMs and The Law Of Conservation Of Attractive Profits
  2. What Happens When Hardware Makers Can Make No Profit
  3. Will Attractive Profits in the Android Ecosystem Move to Component Makers?
  4. Understanding Hardware Modularization in the Android Ecosystem
  5. Samsung Mobile’s End Game

What we are currently witnessing is a macroscopic trend that is working out almost exactly as Clayton Christensen’s disruption theory would predict. The way that Samsung is losing both market share and profits is typical disruption. However at this point, it is still not clear where the attractive profits will shift to.

As I discussed in the second article (What Happens When Hardware Makers Can Make No Profit), hardware OEMs tend to do funny things (crapware) when they can no longer make direct profits. You can’t blame them because they are fighting for their survival. What Google is doing with Android One is quite extreme because they are effectively preventing OEMs from doing crapware. They are basically saying that we’re not letting you pull the tricks that you need to survive.

What makes this situation even more convoluted is the fact that although Google does not make any direct profit from Android, Microsoft makes huge amounts of money. In fact, Samsung paid Microsoft 1 billion USD last year for using Microsoft’s patents in their Android phones (based on the number of Android devices sold). This amounts to 1% of total handset revenues. It is well known that Microsoft has similar patent agreements in place with many other major smartphone manufacturers. This is almost all pure profits and hence it is almost certain that Microsoft is making more profit from Android than Google itself.

Adding a further twist, Microsoft is now handing out Windows for free for devices with a display that is smaller than 9-inches. This will no doubt include the right to use Microsoft’s patents as they are included in Windows. Hence compared to Android, Windows will be 1 billion USD cheaper for Samsung. For OEMs, using Windows is much much cheaper than using Android.

Now let’s look at this from a hardware OEMs viewpoint.

  1. They cannot make money through hardware differentiation and are now scrounging for pennies.
  2. In the PC-era, they would have added crapware and bloatware because of the pennies that it would bring in. This was more important than any sales lost due to a worse customer experience (customer experience wasn’t the main concern).
  3. In the smartphone-era, Google is stopping them from placing their crapware in prominent locations on Android. OEMs will be more desperate for pennies.
  4. If OEMs decide to use Windows instead of Android, then they can save pennies. Microsoft might also be less strict with crapware. Windows might be significantly cheaper for OEMs compared to using Android.

The current situation is very complex, and it is hard to say whether Windows will manage to grow through its price benefit. It will no doubt be fascinating to watch as the knots get untied.

Some Apple Pay Notes

I’ve already written about Apple Pay (1, 2) and I’ve highlighted the fact that Apple does not store customer and transaction data. I also mentioned that this might be very attractive for merchants, banks and credit card companies.

As weeks pass from the big announcement on September 9th, more details about the system have been trickling out. An article by Yoni Heisler gives us a more in-depth look, and of particular interest to myself, it gives us the reason why credit card companies might be fully behind Apple Pay.

The credit card companies and other players in the transaction chain are a very important for the success of Apple Pay. Although a lot of attention focuses on the convenience of payments, the reality is that convenience itself is seldom a driver of adoption. In fact, I believe that looking at convenience alone is completely the wrong approach.

Instead, if there is a tangible cost saving associated with Apple Pay adoption, we can expect either merchants or credit card companies to aggressively entice customers to use Apple Pay. In addition to simply putting up notices in the store, this also may be via bonus loyalty points or discounts. Hence the financial benefits will be shared with customers, giving them a financial incentive to use Apple Pay. This will be a much stronger driver of adoption compared to convenience alone.

Yoni Heisler’s article clearly shows where the cost savings with Apple Pay are. Also if you consider the huge size of the savings that the article mentions, it is no wonder that merchants and credit card companies will be very eager to adopt it.

Noyes’ statement brings up an interesting point, namely that the fundamental aspects of Apple Pay weren’t concocted in Cupertino. Rather, Apple Pay was designed in accordance with an emerging token-based mobile payments standard which aims to increase security and reduce the incidence of fraud. To that end, Apple is getting into the mobile payments space at just the right time. So while Apple isn’t necessarily inventing the wheel here, Apple Pay again represents the first real implementation, on a massive scale no less, of the relatively fresh tokenization specification.

That said, it’s not as if Apple took the easy way out and simply developed Apple Pay to conform to the most general requirements for token-based transactions. On the contrary, sources at two top credit card companies who helped work on the implementation of Apple Pay told me that large technical teams from Apple, credit card companies, and banking institutions worked tirelessly over the past few months to implement additional layers of security into the Apple Pay platform.

What this says is that Apple Pay was developed in concert with credit-card companies. The credit-card companies have essentially invested as much in Apple Pay as Apple has. The reason for doing this is to reduce credit-card fraud which costs billions of USD to credit card issuers and merchants. The financial rationale for credit-card companies investing in the increased security is plainly obvious.

Token transactions as they have been implemented for Apple are a new and much higher standard of security for electronic payments. The amount of security built into provisioning tokens and supporting transactions is a new standard that I think will definitely shift fraud patterns going forward.

If it does indeed become the standard, then Google may have a problem as I mentioned in a previous post.