Friday, 25 October 2013

Apple "giveaways" may gain major advantage over Microsoft

Apple's free productivity software and free operating system upgrades could be a game-changer, undermining a key part of Microsoft's revenue model.

Diana Hwang's article on Techtarget talks about Apple's decision to offer productivity tools iWorks and iLife free, as well as allowing owners of Mac computers from 2007 onwards to upgrade to the Maverick OS without any payment.

Compare this to Microsoft's high prices for MS Office and Windows 8, and this starts to close the gap between typical Microsoft and Apple high street prices for equipment.

This shows up a fundamental difference between the two companies' revenue models. Apple makes much of its money from selling a range of hardware with similar user experiences, an upmarket image and excellent service. Microsoft's key revenues depend on selling (or with Office 365, leasing) software.

Apple can afford to give away free software as a "bonus" - Microsoft can't. Yes, Word for example has many, many features, but only a small subset of them is used by most people. How long can it go on becoming more and more bloated? Could Apple's "free offer" even remind Windows PC users that there are good, open-source products out there?

This is a good example of a company trying to gain competitive advantage by adopting a radically different revenue model  from others in the same market.

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