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Forrester Research Inc
(Updated to correct the price of the QuickOffice iPad app in the fourth paragraph. )
Guess which iPad app brought in the most revenue this Christmas? It wasn’t Angry Birds or Fruit Ninja. It was Quickoffice, a productivity tool for viewing and editing Microsoft (MSFT) Office documents. Alan Masarek, Quickoffice’s chief executive officer, shrugs off the success. He notes that the app was regularly among the top-three highest-grossing apps throughout 2011. “It’s fun when you get to No. 1, but we’re pretty used to it,” he says.
Almost two years after iPads started drawing oohs and aahs around conference room tables, demand for tablet-ready corporate software is taking off. After testing the waters in 2011, companies are expected to buy $10 billion worth of iPads this year and $16 billion in 2013, according to Forrester Research (FORR). Workers who already own tablets use them more often than their laptops to view office documents, says Forrester analyst Sarah Rotman Epps. And with big productivity software makers like Microsoft and Oracle (ORCL) mostly steering clear of tablets for now, a number of startups are trying to fill the void. They’re honing applications for stock traders, salesmen, spreadsheet wizards, and restaurant chains. “We’re just at the beginning of a renaissance of the post-PC productivity software business,” says Epps.
Many of the entrepreneurs in the post-PC world are corporate software veterans like Masarek. After a short career in private equity, he co-founded two enterprise software companies during the Internet Boom of the late 1990s that were subsequently sold at Internet Bust prices. Then in 2002, with Research In Motion’s (RIMM) BlackBerry taking off, he raised $3 million—and invested much of his net worth—into Quickoffice to develop applications for the nascent smartphone market. By 2010, Masarek had struck deals with Nokia (NOK), HTC, and others to pre-install software for viewing Microsoft Office documents on hundreds of millions of devices. Yet few users agreed to pay $10 to upgrade to a version that enabled editing as well as viewing. Even road warriors didn’t want to do real work on a tiny screen. “My wife was worried,” he says of the years when Quickoffice struggled. “I’m probably more bullheaded at times than I should be, but I wasn’t going to lose investors’ money again.”
The iPad changed everything. When Quickoffice released a tablet version of its software in June 2010, sales took off. The app can open and edit documents from Microsoft’s most popular productivity software programs: Word, Excel, and PowerPoint. It also ties into cloud-based storage providers such as Dropbox and Box.net and social networks such as Facebook, so users can easily store and share those documents. The app’s $20 price tag is high relative to the app store’s typical $0.99 offerings, but Masarek says he’s not worried about appealing to everyone. “I don’t care about units, I care about money,” he says. Sales topped $30 million in 2011 and are expected to grow more than 50 percent in 2012, say two people familiar with the company’s finances, but who did not have permission to divulge the numbers.
On Jan. 13, Quickoffice got a competitor in the form of OnLive Desktop. The iPad app creates a virtual desktop: Copies of Microsoft’s productivity suite run in OnLive’s servers and the results are transmitted to a user’s iPad over the Internet, creating the illusion of working on a full-powered desktop PC. During its first weekend in the app store, Perlman says OnLive Desktop was the top free app. (Users can upgrade to a version with more features for $10 a month.) “All we’ve done is put up a website, and hundreds of companies have contacted us,” wanting to make bulk purchases for employees, says Steve Perlman, CEO and founder of OnLive. “It’s insanity.”
Other startups are looking beyond Office. Veeva Systems makes a sales-tracking app called iRep, now used by 10,000 pharmaceutical salespeople. The company brought in more than $55 million in 2011 and is expected to double that in 2012, according to two people who requested anonymity because the numbers aren’t public. A tablet is superior to a laptop in pharmaceutical sales, and about 20,000 of the world’s 300,000 drug salespeople have an iPad, according to Matt Wallach, a Veeva co-founder. “A physician may only give a salesman 10 seconds,” he says. “It can’t be spent waiting for the laptop to boot up.”
Some app-makers are using their tablet success to move into new markets. For the past 10 months, San Diego’s MeLLmo, founded by Santiago Becerra, has given away an app called Roambi, which makes it easier for businesspeople to analyze data by converting spreadsheets into colorful, 3D charts. Delighted customers began asking their IT departments for a way to integrate Roambi with corporate data-mining systems as well. Now nearly 200 companies buy Mellmo’s server software for around $800 per person, and the startup has signed three deals worth more than a million dollars each. “This is serious business,” says Becerra, who has sold two companies to Oracle. Corporate mobile apps are “the opportunity of a lifetime.” The three-person startup Visible Market has sold 30,000 copies of its $4.99 app StockTouch, a tool for analyzing financial markets. CEO Jennifer Johnson hopes to make more money by convincing financial services companies to buy customized StockTouch apps for their clients.
The existing enterprise juggernauts have so far been reluctant to dip into the tablet market. Microsoft has announced iPad versions of less-popular applications such as its OneNote note-taking program and its SkyDrive online storage service, but few expect an official Word for iPad app any time soon. That may be because they’re afraid of throwing a wrench into a cash-generating machine. Microsoft makes roughly $100 per upgrade for every corporate worker who uses Office on a PC. Company spokeswoman Hannah Coen declined to comment.
Masarek doesn’t think Microsoft will risk its $22 billion-a-year Office franchise just to smite a startup—especially since it would mean making software for a hit product from an old enemy, Apple (AAPL). He bets that Microsoft will wait to debut a full-blown Office app until later this year, when devices running the company’s own Windows 8 mobile operating system become available. “Doing an iPad version of Office would be like selling arms to the enemy,” he says.
The bottom line: Quickoffice made $30 million in 2011. It’s big money for an app-maker, but so far not enough to lure Microsoft into the iPad market.