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By Kevin McLaughlin originally published on CRN.com
October 22, 2012

As Microsoft (NSDQ:MSFT) readies its version of Office for iPads and iPhones, Apple (NSDQ:AAPL) and VMware are teaming to build an iPad cloud-hosted office suite that will let organizations ditch Office entirely, CRN has learned.

According to sources with knowledge of the project, the iPad app combines VMware View virtual-desktop software with cloud-hosted versions of Pages, Keynote and Numbers — known as the iWork suite — running on Apple infrastructure. VMware’s Horizon Application Manager, a management tool that has been likened to an enterprise app store, is also included, sources told CRN.

Apple and VMware are also working together on Horizon Mobile for iOS, part of the Horizon Suite VMware showed off at VMworld, which is slated for beta release by the end of the year. Horizon Mobile creates a partition between the personal and business apps and data on a device to solve IT concerns with the bring-your-own-device trend.

The infrastructure that Apple is building for iWork is a separate offering from iCloud, Apple’s consumer-focused storage service. Sources did not have any information on when the cloud-hosted iWork suite will be released or what it will cost.

The iWork suite has been primarily aimed at consumers since Apple launched it in 2005. But with Microsoft reportedly planning to launch an iOS version of Office next March, Apple is recasting iWork for businesses in order to challenge Microsoft’s Office cash cow, sources told CRN.

Apple’s last major update to iWork came in 2009, when it debuted iWork.com, a service that allowed users to share files online. Apple launched iCloud last October and shut down iWork.com in July. With the release of OS X 10.8 Mountain Lion, Apple introduced Documents In The Cloud, a service that syncs data from Pages, Keynote and Numbers on multiple devices using iCloud.

“Apple wants Pages to be seen as a replacement for Microsoft Word, Numbers as a replacement for Excel and Keynote as a replacement for PowerPoint,” one source familiar with the project told CRN.

Apple did not respond to a request for comment on the project. A VMware spokesperson contacted by CRN declined comment, citing the company’s policy of not responding to rumors or speculation.

[highlight type=”one”]Bob Venero, CEO of Future Tech, a Holbrook, N.Y.-based solution provider, said he sees an enormous appetite for a cloud-hosted iWork suite in the small to medium business market.[/highlight]

[highlight type=”one”]”The world has become impatient with the monopoly Microsoft (NSDQ:MSFT) has around its Office productivity suite,” said Venero. “There has been the launch of many competing alternatives, some of them fee based and others that are free. Regardless of whether it is free or not, they are a fraction of the cost of the Microsoft Office Suite.”[/highlight]

[highlight type=”one”]”For an SMB account, you are talking cost savings of 20-30 percent minimum, which adds up conservatively to millions of dollars in savings across the U.S. SMB marketplace,” he said. “These SMB customers are the largest segment impacted by the economic challenges currently facing us. These savings could come at the time when these organizations need them most. Businesses need to type documents with words on them, they need to have spreadsheets that will calculate numbers and they need databases. If they can get that functionality out of a product that is one-tenth the cost in today’s market, they will. The dominant mood out there is to save money.”[/highlight]

Office is Microsoft’s biggest cash cow, accounting for more than $22 billion in fiscal 2011 revenue, so it would make sense for Apple and VMware to try and chip away at it. Microsoft’s murky position on Office in the cloud, as evidenced by its licensing spat earlier this year with OnLive, could also be part of the raison d’etre for the Apple-VMware iPad app, sources told CRN.

[highlight type=”one”]One sign of the challenges that Microsoft faces with its Office suite franchise in the current market, said Venero, is the fact that customers can buy a brand-name notebook for less than the cost of the Microsoft Office Professional suite.[/highlight]

[highlight type=”one”]”If I buy Office Professional online from Microsoft.com, I will pay $499.99,” said Venero. “That’s a one-user, two-PC license. If I want to save money, I can buy the Professional Version for one user, one PC for $349.99 from Microsoft.com. I can go buy a Lenovo 15.6-inch laptop with 4-Gbyte RAM, a 320-Gbyte hard drive for $299.99 from BestBuy.com.”[/highlight]

[highlight type=”one”]”When the price of the software exceeds the price of the device that the software will run on, you have an enormous challenge of justifying the price of that application when there are alternatives out there like the Apple (NSDQ:AAPL) iWork Suite, Google (NSDQ:GOOG) Apps and OpenOffice.”[/highlight]

The Apple-VMware iWork development effort comes with Microsoft offering businesses and consumers who buy Office 2010 a free upgrade to Office 2013 when it ships next year.

Microsoft has not said exactly when Office 2013 will ship other than to say it will be on retail shelves sometime in the first quarter of 2013.

The new Office 2013 release is critical because it’s been redesigned to work with Windows 8’s touch-screen interface. That could prove crucial to Microsoft’s efforts to expand Windows’ footprint in the tablet computer market that’s now dominated by the Apple iPad and tablets running Google’s Android operating system.

Microsoft is set to launch the long-awaited Windows 8 in a series of events this week.