Last month’s Apple launch event shook up conventional thinking when the company launched its latest product. No, I am not referring to the iPad Air, although that did make a promised appearance. The big news on October 22 was the new operating system, Mavericks and, more specifically, the decision to offer it up for free.

1. 118 GlobeAsia December 2013
Technology
CJGUNTHER/EPA
Apple vs. Microsoft:
Free software and the battle for hearts,
minds and market share
This was a momentous
announcement by any measure,
matched only by the next statement:
that the iLife and iWork suite (as
well as all future software and OS
updates) would also be provided free
to customers purchasing new Apple
devices.
Perhaps least pleased with the
developments were the folks over in
Redmond, Washington. Microsoft has
been on the ropes of late, and Apple’s
move must have them reeling. While
Windows 8.1 was released as a free
update, Microsoft has never released a
full-blown new version of its Windows
OS to the public for free. Further,
Apple’s iWork offer is a direct assault
on the Office suite, currently one of
Microsoft’s main breadwinners.
This is a game-changer of course,
because while Apple builds all its
ast month’s Apple
launch event shook up
conventional thinking
when the company
launched its latest product.
No, I am not referring to the iPad Air,
although that did make a promised
appearance. The big news on October
22 was the new operating system,
Mavericks and, more specifically, the
decision to offer it up for free.

2. December 2013 GlobeAsia 119
by Jason Fernandes
away free because the net effect is still
positive for them. To be clear, Apple
never charged a great deal for its OS
upgrades in the first place. The last
upgrade was sold at a mere $19.99 and
the one before that at just $10 more.
As many an app developer has
learned, there is a world of difference
between low-cost and free. Several
potential customers have fallen into
this chasm and Apple seeks to close
the gap. In merely lowering the cost to
free, Apple has effectively pulled the
rug out from under its competition
while only hurting itself mildly and in
the short term. Apple can still thrive
on its device sales alone and need not
rely on its software as anything other
than something to sweeten the pot for
potential hardware customers.
If this weren’t bad enough news
for Microsoft, Apple is also trying to
be competitive in the productivity
space with the release of iWork to
new customers for free. Microsoft has
dominated this area for a long time but
is also in the midst of a precarious shift
to a subscription model. Apple’s move
could complicate things for Microsoft
as it works out this delicate change.
In many ways Apple is playing
catch-up to Microsoft here because
Microsoft was the first one to bundle
the Office suite onto the Surface for
free. Apple has taken it one step further
however, by making the same true with
its desktop offerings. Unfortunately
for Apple, the new move is unlikely to
hurt Microsoft since Office is the most
popular productivity suite in the world
and iWork pales in comparison.
iWork has always had a reputation
as a light productivity suite and it never
quite punched in the same weight
class as Office. Going free is not going
to make it any better-featured and
so to businesses, and anyone other
than casual users, Microsoft Office
will remain an essential. Things could
change however, if iWork evolves into
a full-featured business productivity
suite over the next few years.
Microsoft couldn’t do it
Perhaps the biggest concern for
Microsoft is that fragmentation is a
way of life in the Windows ecosystem.
Quite a few (particularly enterprise)
customers avoid upgrading their
operating systems for reasons that are
completely unrelated to the cost of the
OS itself. Many Windows 7 and even
Windows XP users remain on those
operating systems solely to avoid the
steep learning curve and compatibility
issues they would experience if they
upgraded.
These problems ensure that the
Microsoft OS ecosystem remains
so fragmented that developers have
varying ideas on what constitutes
Windows “support” and many make it
up as they go along. The fact that many
Microsoft users would not upgrade
their operating systems, even if the
next version were free, makes things
complicated for developers and also
ensures Microsoft’s helplessness in the
matter.
iWork going free puts
Microsoft in the delicate
position where it has to
modify its core Office
business model, and still
maintain a stream of
revenue from one of its
few consistent cash cows.
own machines, Microsoft (with
the exception of the Surface) does
not build any, and thus cannot use
its software as a loss leader for its
hardware. This is bound to put
the screws on an already teetering
Microsoft to come up with something,
and quickly.
What’s in it for Apple?
The important thing to remember
is that Apple is not only giving away
Mavericks, but is actually spending
money in terms of bandwidth fees
and the like to deliver it to the
consumer. This of course begs the most
obvious question: why? The answer
can be summed up in one word:
fragmentation. Or rather, the lack
thereof.
It is in Apple’s interest for the
greatest number of its customers to
be uniformly on the latest operating
system. This enables programmers
and app developers to focus on a
single OS, rather than spend time to
ensure backward compatibility. This
is precisely the strategy Apple has
followed to great success in the mobile
space.
Apple has managed to dominate the
energy and talents of app developers
precisely because developers have
realized that designing for iOS allows
them to reach the greatest number
of users with the least amount of
programming resources.
In the short term, Mavericks itself
is unlikely to affect things greatly.
However in the long run, this could
lead to developers choosing en masse
to focus on the Apple ecosystem, thus
making things very difficult indeed for
Microsoft.
Apple can afford to do this
Apple has spent valuable R&D dollars
to develop a product they will give

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Technology
Did the ground just crumble?
Microsoft does have options. It’s no
secret that Microsoft is aware the
“software in a box” model is on its
way out. The company has been
experimenting with moving to a
subscription-based model on software
for a few years now and all this does is
increase the urgency.
In the short term Microsoft does
not have anything to worry about
simply because the Office suite is so
popular and full-featured that the
company is unlikely to lose many users
to iWork. The fact is, though, estimates
say Microsoft currently needs to
generate $80 million daily from Office.
iWork going free leaves little
breathing room and puts Microsoft in
the delicate position where it has to
modify its core Office business model,
and at the same time maintain a steady
stream of revenue from one of its few
consistent cash cows. Still, Microsoft
has weathered the likes of OpenOffice
and there is no indication that iWork
will be any different.
Microsoft’s recent heavy investment
in hardware is also an interesting trend.
Microsoft’s tablet offerings the Surface
and Surface 2 include the Office suite,
indicating that Microsoft increasingly
sees its hardware and software business
as intricately interlinked. Microsoft’s
recent acquisition of Nokia and a
new stake in Dell also offer clues as to
Microsoft’s plans.
To combat Apple in the OS space,
Microsoft might work more closely
with Dell to produce a more unified
product consumers are willing to spend
on. Microsoft, and indeed technology
in general, is slowly moving towards an
era where there is greater integration
between hardware devices and the
software they run on.
Those of us in the tech industry
live in interesting times. For many
years, Microsoft and Apple battled
until it seemed Microsoft had won.
Then Apple slowly started to resurrect
itself. Today Apple is a behemoth and
For years, Microsoft and
Apple battled until it
seemed Microsoft had
won. Then Apple slowly
started to resurrect itself.
This latest shot across the
bow from Apple has, if
nothing else, signaled the
return of the tech wars of
the late 20th century.
Microsoft is struggling. This latest
shot across the bow from Apple has, if
nothing else, signalled the return of the
tech wars of the late 20th century. The
game just got interesting again.
As Apple moves into the business
of providing free software for its
hardware, its plans will not go
unchecked. Microsoft is watching
Apple’s moves closely, and will likely
use its increased influence with
hardware manufacturers like Dell
and Nokia to create and promote
its ecosystem as a whole, instead of
software and hardware as its individual
components.
Apple’s move was ground-breaking
because it finally has consumers
considering the total cost of ownership
of their devices. Free updates in
perpetuity are a potent promise for a
consumer and must not be discounted.
Your move, Microsoft.
Jason Fernandes is a tech commentator
and the founder of SmartKlock.