Microsoft has its own mobile operating system and devices. Thanks to a variety of legal and strategic moves, though, Microsoft also owns a sizeable chunk of its largest competitor. Microsoft already generates significant revenue from Android and it is poised to rake in the cash from Android users thanks to a newly announced partnership to pre-install Microsoft Office and Skype apps on a wide variety of Android tablets.
Microsoft revealed yesterday that it has entered a strategic agreement with 20 different Android OEMs—including Sony and LG—to install Word, Excel, PowerPoint, OneNote, OneDrive and Skype on their Android tablets. A new LG tablet and the Sony Xperia Z4 are slated to come with the Microsoft apps pre-installed in the next 90 days.
“Our strategic agreements with these partners demonstrate how Microsoft is leveraging the scale of the hardware ecosystem, and working with partners in new ways to deliver rich experiences to our customers,” said Microsoft’s Nick Parker in a blog post announcing the new relationships. “This is a cornerstone of our cross-platform services strategy, to bring an array of Microsoft services to every person on every device.”
It is part of Microsoft’s broader cross-platform strategy. Under Satya Nadella’s leadership Microsoft has taken a much more aggressive platform-agnostic stance rather than trying to force users to stay on Microsoft’s own operating systems and devices. Microsoft has made significant progress in providing access to its tools and services no matter what platform or device a customer chooses. More importantly, it has focused on ensuring a consistent and seamless experience which makes it more likely customers will choose to use those familiar Microsoft apps no matter what device they’re on.
Microsoft offers the same—or sometimes better—apps on iOS than it does on Android, or even on its own Windows Phone mobile devices sometimes. However, iOS is a closed ecosystem controlled by Apple. Apple owns the operating system. Apple manufactures the hardware. Apple controls access to the App Store. Microsoft is doing an excellent job of navigating iOS but there’s no mistaking that Microsoft is playing in Apple’s world.
Android is a different story. While Android was developed by and is closely tied to Google it is an open source operating system. Google doesn’t “own” it per se, and Google makes zero dollars of revenue from licensing the Android OS itself. Microsoft on the other hand generates about $2 billion a year in revenue from Android manufacturers in agreements over licensing Microsoft patents that are infringed by the Android OS.
Because Google does not own the platform and has no direct control over the manufacturers who produce Android smartphones and tablets, Microsoft is free to negotiate arrangements like this one—strategic alliances that enable Microsoft to more or less hijack Android from the inside. Android users generally default to using Google productivity apps and services because they’re pre-installed on the Android devices and tied to the Google account the user logs into the mobile device with. It’s just easier to use the apps that are already there rather than seeking out and installing something else.
By making the Microsoft apps available by default on those same devices Microsoft is reducing the friction for users. With the Microsoft apps pre-installed they become the path of least resistance. They offer a consistent, familiar experience and integrate seamlessly with Microsoft Office applications on other devices. Storing files in OneDrive makes them instantly accessible using those same Office applications on other platforms and the user doesn’t need to re-learn anything or figure out how to convert files.
The move by Microsoft will also spark more revenue from Office 365. The basic functionality of Microsoft Office is available for free on smartphones and tablets, but Office 365 customers unlock the full features and capabilities of Office. Pre-installing the free apps will give users a taste and many will choose to invest in Office 365 to gain access to the full power of Microsoft Office from the Android tablet.
Google is still in the driver’s seat for Android. It is expected to unveil the latest major release of the OS at the Google IO conference which begins tomorrow in San Francisco. Microsoft will continue to compete with Android as it develops and launches Windows 10 Mobile. Microsoft is an enviable position, though, because even if it loses the platform battle it still wins the revenue war because it will make money either way.
