Posted: June 01, 2008
Google aims to snare business from Microsoft with free online software designed for small- to medium-sized businessesBy Eric Peterson
A long-brewing rivalry with far-ranging battlefields, the computing clash of the 21st century is coming to a desktop near you.
Redmond, Wash.-based Microsoft has long dominated the productivity software space with its ubiquitous Office suite, and its Word, Excel and PowerPoint applications have become household words. The company’s revenues from its business division — 90 percent of which are derived from sales of Office and its component apps — were more than $16 billion in 2007, topping both Microsoft’s server and operating system divisions, with a profit margin approaching 70 percent.
Those financials are not lost on Mountain View, Calif.-based Google. The search titan is now in the same rarified league as Microsoft — at press time, the companies’ respective market caps were $180 billion and $278 billion. Now Google is looking for ways to translate its dominance in Internet search (about 70 percent of the U.S. search market) to cash-cow markets Microsoft has long dominated.
Naturally, Microsoft’s near-monopoly in the productivity software market — the market share for both Word and Excel are about 95 percent — is one such target.
Google’s answer is Google Apps, its own office productivity suite with applications like Docs — Google’s answer to Word, Excel and PowerPoint, rolled into one online package — Gmail, and Calendar. Documents can be exported into standard Office file formats, and likewise Office documents can be opened by Apps. And since the Apps launch in February 2007, Google has rapidly rolled out one improvement and new feature after another, the latest being an integration of Salesforce.com’s customer relationship management software into Apps.
Unlike the $300-per-user price tag borne by a typical copy of Microsoft Office, Google Apps is available free for a standard account or $50 annually for a Premier Edition account with more memory, more features and technical support - plus advertisements keyed to the text in Gmail messages.
Also unlike Microsoft Office, Google Apps runs online: no installation, maintenance or update downloads necessary. That means data that’s accessible anywhere — "in the cloud" in techie slang — and a corresponding sharp reduction in IT spending. It also means your data is saved on Google’s servers.
"What we see as a big benefit of Apps is collaboration and efficiency," Google spokesman Scott Rubin says. "You never have to worry about access to the data. When I’m working on a document with my colleagues, I don’t have to think about what version I’m looking at. It’s updated in real time. Within spreadsheets, we have an embedded chat window."
Rubin says 500,000 different domains have been registered with Google Apps since its launch a year and a half ago and continue signing up at a blistering pace of 2,000 a day. The businesses that have moved to Apps are in industries "across the board and of all sizes," he says. "Anyplace people need to work together, that’s where we’re seeing quicker adoption."
Going with Google
Fort Collins-based TradingTrainer.com made the leap from Microsoft Office to Google Apps in April 2007. A little more than a year later, company founder A.J. Brown gives high marks to Apps.
TradingTrainer.com teaches people to trade stock options, Brown says, and communication and collaboration are critical in the company’s courses. Standard Microsoft Office applications don’t allow for collaboration, he says.
"Using them was a nightmare. Everything was done by phone." Google Docs is a world away, he says. "We can see each other typing in real time."
Since moving to Google Apps, Brown’s 12-employee company has used every tool in the Google Apps belt, most notably Calendar, Docs and Gmail, for purposes both internal and external. Every student in the company’s Trading Trader Apprentice Program receives a TradingTrader.com e-mail address and start page courtesy of Google and schedules appointments via Calendar. The latter "saved a whole administrative assistant — $30,000 to $40,000 a year," Brown says.
But Brown saves his highest praise for Docs. "We would not be able offer the Trading Trainer Apprentice Program at all without it, and it brought in $300,000 in its first full year," he says. "And for a small, 12-person company, $300,000 is a lot of money." And it’s even more money if you got the key tool behind the business for free.
Google is hardly the only player in the Web-based productivity software arena. Some observers even believe Apps is a somewhat meaningless counterpunch to Microsoft’s efforts to catch up with Google. So it pays to shop around — even if you’re buying free or nearly free software. Options abound, from Google Apps to Sun’s StarOffice, Yahoo’s Zimbra, and the open-source OpenOffice.
Centennial-based Verio offers a wide range of competitively priced online business solutions it dubs "software as a service," ranging from e-mail servers to data backup.
Founded as a data-services and Web-hosting provider in 1996 and weathering the dot-com bust via an acquisition by NTT Communications, the company now provides hosting and productivity software to small- and medium-sized businesses.
VP Steve Renda defines Verio’s market as the low end of the enterprise spectrum — i.e. companies with 1,000 employees or fewer. "The sweet spot is zero to 500 employees."
Traditionally, such companies could not afford higher-level applications like customer relationship management because of the investment in hardware, office space and staff, not to mention seven-figure subscriptions.
"Cost is an issue, and this strategy addresses it," Renda says. "You don’t have an IT staff. Who’s going to run it? Who’s going to maintain it?"
Small businesses have traditionally utilized cheaper software — i.e. Microsoft Office applications — in lieu of enterprise systems with the big price tags. "As opposed to CRM, you probably had spreadsheets and e-mails," Renda says.
The resale community has only realized in the past couple of years how to adopt and resell this technology, he says: "They had to ask themselves, ‘If I’m used to a business model where I’m paid up front, how do I move to a business model where I’m paid over time?’"
Free is never free
Renda raises some good questions for any business contemplating the leap from Microsoft Office to Google Apps or a similar package from another provider.
"Data security is a big issue," he says. "How do you know it’s going to get out into the wild? Is the vendor’s primary business something else, like search? Is the vendor going to use this information for something else? Free is never free."
Another selling point worth exploring is the offline functionality of an online product.
Some online applications are more limited than others when they’re unplugged from the Web. With some applications, "You can’t do anything on a laptop," Renda says. Google Docs has offline functionality, but it is limited in that it remains impossible to create a new document without an Internet connection.
Renda believes Google Apps is getting little traction in the small- and medium-sized business space.
"They may be gaining some steam in the extreme low end of the office software market — i.e. in home offices and sole proprietorships — but not in the larger (small- to medium-sized business) market," he says. "Those folks tend to buy these applications. When you get above that very low end, companies are still willing to pay for it."
And Microsoft is by and large who these companies pay. The company is firmly entrenched in the resale community and commands 95 percent of the market.
Englewood-based Statera isn’t exactly on the sidelines of the Microsoft-Google bout: Now with 250 employees in five offices, the company is a Microsoft Gold Certified Partner. Statera billed about $35 million in revenue last year from clients ranging from "startups that need technology on up to global Fortune 500 companies," says Brad Weydert, the company’s president.
In Weydert’s mind, the question is no longer whether businesses will move to online productivity software but how fast and to what degree. "There is a wave, but things tend to happen slowly," he says.
Weydert says startups and small businesses should "definitely" explore such hosted applications as Google Apps and Salesforce.com, the latter of which Statera utilized in its infancy after its founding in 2001.
"In two days we were up and running," Weydert says. "But if you’re going to integrate it with other enterprise applications, it requires a lot of work."
Change is afoot as the Internet — and its user base — grows up, he adds. "Business is also going to wrestle with all of the social networking and Web 2.0 applications out there. Some of it has business relevance, but others are just social."
Weydert expects social networking to soon be integrated into enterprise applications for productivity’s sake.
"I think they’re definitely going to converge," he says. "The world is truly flat. And because you can better communicate and coordinate with people around the world, you’re seeing a lot of mid-level management go away."
But any buzz about a rapid revolution "is hype over reality," he adds. "It’s going to take quite a few years to retire legacy systems that weren’t built for the Web. You’re going to phase out over a period of time. You’re not just going to write it off."
A Web-based future
Nonetheless, the days of field reps selling, installing, and maintaining big systems at a client’s location are over, Weydert says.
"You won’t need to do any of it. You’ll have applications you can run in a cloud. The question is, how do you reorganize? Change creates opportunity," he says. "There are all kinds of things you have to take into consideration. You can’t just plug it in, because every business is different."
Microsoft has continually upgraded Office and its individual components over the last 25 years and is in the midst of migrating many of its applications to the new online world, Weydert says: "Their applications are already very rich."
And getting richer. The broad strategy calls for a slow-but-steady move toward a Web-based future, with such new products as Microsoft CRM Live being dubbed "software plus service" and plans to offer an online version of the Office suite soon. Code-named Albany, the product is in beta testing and will ultimately run users about $10 a month.
Microsoft’s new forays into the online world are going to come at a price, Weydert says. "They’re going to cannibalize their own market." And beyond themselves, the rival most likely to eat Microsoft’s lunch is inescapable.
"Obviously, Google is Microsoft’s biggest threat," says Weydert, conceding that Google Apps are probably adequate for most workers. "The features will get there. The average worker doesn’t use 90 percent of what’s on their computer’s desktop, anyway."
But like Verio’s Renda, Weydert also sounded the data-security, mixed-motive alarm. "Google is going to give their applications away to get advertising dollars," he says.
In response, Google’s Rubin is quick to dispel the notion that somebody at Google is scanning Gmail to place relevant ads onscreen. "It’s automated," he says. "No human being reads your e-mail."
In the end, the Google vs. Microsoft storyline is inescapable, but technology moves too quickly and too secretly to declare this a one-on-one match.
"Right now, it’s a four-legged race between Microsoft and Google, but the winner could also be IBM or another company," Weydert says.
Regardless, the two marquee names are definitive favorites. "Both Microsoft and Google have these huge hydroelectric-powered server farms in the Pacific Northwest," Weydert says, and those farms are just waiting to host your data. "It’s a race. It is really changing technology like electricity changed with the adoption of the grid. Only technology is much more complicated than electricity."
This is merely the beginning of the story. Google and Microsoft’s epic prizefight is in round one, with Microsoft recently axing a potential Yahoo acquisition (for now) and turning its focus inward in hopes of gaining lost online-advertising ground as Google looks for every available toehold on your desktop.
The victor won’t be declared anytime soon. As Verio’s Renda puts it, "I still don’t think all the evidence is in."
Give it another five years and it likely will be.
Denver-based writer Eric Peterson is the author of Frommer's Colorado, Frommer's Montana & Wyoming, Frommer's Yellowstone & Grand Teton National Parks and the Ramble series of guidebooks, featuring first-person travelogues covering everything from atomic landmarks in New Mexico to celebrity gone wrong in Hollywood. Peterson has also recently written about backpacking in Yosemite, cross-country skiing in Yellowstone and downhill skiing in Colorado for such publications as Denver's Westword and The New York Daily News. He can be reached at Eptcb126@msn.com