Category Archives: strategy

Why Apple is giving away software for free

Free hugs

Free is an unusual price to put on a piece of enormously complex desktop software like an office suite or an OS. Especially when sales of that software currently earn you hundreds of millions a year. Yet that’s was Apple’s surprising move this week, to drop the price of OSX and their productivity suite to zero.

The easy answer is – well, they make a lot of money from hardware already, PCs are becoming more like devices/appliances anyway, why not through in the software as part of the whole stack. Also given the ever shrinking prices and margins of consumer hardware, Apple needs to do something to keep up their consistently high ASPs on notebooks and desktops.

But for strategy wonks, there a few more interesting ways to read this move:

  1. You could read it as powerful competitive move to undercut Microsoft’s primary business model (which is still per-machine OS and office licenses). Microsoft’s model makes less and less sense in a cloud, multidevice and integrated product world. This is Apple trying to kick MSFT further into obsolescence and compete in a way that MSFT can’t.
  2. You could read this a competitive response to Google, who already offer free OSes and web-based productivity suite (google drive) with a constant stream of free upgrades. It’s only a matter of time before Google’s office suite and chrome book OS is widely-enough considered ‘good enough’ to start triggering bottom-up disruption. So you could say Apple had no choice but to give up revenue and has been forced to compete on Google’s terms.
  3. Lastly, from an ecosystem perspective you could look at the advantages and operational savings related to having all (or almost all) your users using the latest version of your stack. MSFT and Google ecosystems both suffer from heavy fragmentation due to many people stuck on old versions of OS/products. Apple is moving to a model where they can rapidly move users to the latest and greatest versions. This reduces their own support costs, their developers’ costs and increases the value of the ecosystem in the eyes of developers.

see also: this post is essentially a repost of a comment I left on asymco. Horce’s post there is worth a read – The value of zero-priced software

Upvotes on that comment and a couple other interesting moves by apple lately have inspired me to blog again and write a few more posts I’ve been noodling. There’s a few other implications of Apple’s recent announcements that tech press seems to have missed out on. Stay tuned.

Track of the day: Get Free by Major Lazer, because you probably haven’t been listening to enough Major Lazer today. I mean, how would that be possible?