This morning, Apple unveiled their latest iPads and Macbooks, and along with it, revisions to both iLife, Apple’s suite of “lifestyle” apps like Garage Band, and iWork, Apple’s version of Office. Only instead of charging for them, Apple is making the updates free to current iLife and iWork users. Now granted, compared to the installation base of Office and Windows, there aren’t that many iLife and iWork users out there to begin with, and while Apple may be leaving some money on the table, it’s probably worth it for the disruption and attention the move seems to be getting.

The news certainly did generate a fair amount of attention both on Twitter and in blog posts and news articles covering today’s Apple announcements, and at the same time reopened the subject of Office for iOS. Microsoft has been rumored to have been readying a version of Office for the iPad and iPhone for more than two years now. In fact, according to a CNET post from back in June at the announcement of “Office Mobile for Office 365 Subscribers”, Josh Lowensohn recaps the long history of Office for iOS rumors, dating all the way back to February of 2010, months before the iPad was released.

Microsoft did release that Office 365 version for iOS, but took some heat for releasing an app that only worked with previously paid subscriptions of Office 365. No free trials, no Office for Web Apps, no upgrades to full versions. Now why would that be? Why would Microsoft release an app only for already paid customers (well aside from some benefit to them, of course) and not try to sell more copies of Office to a potentially new audience?

In a post today on Bits, the New York Times’ tech blog, Nick Wingfield credits Apple with swooping in to the void left by the lack of an Office app in his post “Apple Exploits Microsoft Hesitation on Office“. Wingfield notes that “Microsoft began working on an iPad version of Office some time ago — but for reasons that remain unclear, the company has not released it”, but then hits the nail on the head:

The more difficult question for Microsoft is whether it can stomach sharing 30 percent of the sales of Office apps for iPad with Apple. That is the standard cut Apple takes for software sold through its App Store.

Doesn’t it make a lot more sense that rather than exploiting Microsoft’s hesitation, Apple has been playing hardball with their app store policies, and Microsoft simply hasn’t been willing to fork over 30% of Office or Office 365 revenue and run all potential purchases through Apple just because their customers happen to have an iPhone in their hand? Remember, we’re not talking about some $.99 app here, this is at a minimum $99/year for Office 365 and potentially hundreds of dollars for Office.

Microsoft and Apple have already been battling over Apple’s App Store policies, as late last year Apple blocked Microsoft’s SkyDrive app from the Apple App Store because of just such a “kerfuffle” over the 30% fees, as we reported back in December.

As Paul Thurrott noted in his notes on this September’s Financial Analysts Meeting, the subject of Office for iOS came up again. He quotes Qi Lu, EVP of Microsoft’s Applications and Services Group:

“(T)he first factor [strategically] is customer interest and customer experience. It is quite important for us to ensure that there’s genuine customer interest, customer need, and at the same time we can also deliver a quality experience that serves our customer’s needs. The second factor is economics, and financially it has to make sense for Microsoft.  So those are the two factors that guide our decision-making.”

(emphasis ours)

As usual, Apple came out today reinforcing its walled garden, offering up a free version of their productivity suite while at the same time demanding exorbitant fees for far more popular and polished software coming from Microsoft. They’ve got Microsoft backed into a corner on this one, and they know it, and most likely planned it all along. And again as usual with most of these battles between behemoths, it’s the users who get left out in the cold.