Microsoft has long dominated the e-mail, collaboration and office tools market, but Google is launching a strong challenge.
Microsoft has long dominated the e-mail, collaboration and office tools market, and its customer list dwarfs that of Google and all other competitors. But despite the presence of well-established alternatives such as OpenOffice and IBM's Lotus Notes, some industry analysts believe Google may pose the strongest long-term threat to Microsoft's office dominance.
"Google is still a wannabe, but they're Google so this is a very strong challenger," says Laura DiDio, lead analyst with Information Technology Intelligence Corp (ITIC).
Why should a business choose Google over Microsoft? Google is inexpensive, at $50 per user per year. Employees are often familiar with Gmail, so user training shouldn't be too burdensome. Outsourcing IT functions to Google lets businesses reduce internal IT expenditures and wasted time maintaining servers and applications. With Google, businesses get the basic productivity tools of e-mail, calendaring, and document creation and editing, as well as a Web site builder, private video sharing and other functions. (See related article, "Google Apps basics".)
Yet even Google has a hard time arguing that its own office tools are just as good as Microsoft's. And customers and analysts agree that Google's support is not on the same level as Microsoft's, which has far more experience dealing with the needs of enterprise customers. (See Microsoft Office vs. Google Apps: The business brawl.)
But Google's momentum, and the emergence of cloud computing as a viable alternative to in-house IT systems, has clearly caused Microsoft to change the way it approaches the office market. Microsoft is offering its own online services now, and is being forced to give better pricing to customers who bring up the name of Google as a negotiation tactic.
Rexel, an electrical distributor in France, recently chose to deploy Microsoft Exchange Online instead of Google Apps and was able to get pricing that was nearly identical to Google's $50 per user per year, says CIO Olivier Baldassari.
"We were fortunate in the process to have this competition playing in our favor," Baldassari says. "Microsoft has been pushed by Google. And Google keeps pushing Microsoft. I think it is forcing Microsoft to adjust its strategy, and I think Microsoft has been reacting great. It's a good process and I think everybody's benefiting."
Microsoft Office list prices from $150 to $680 for the various home, student, small business and professional editions. Like any IT product, negotiations with large businesses include heavy discounts, particularly when the customer appears to be considering other options.
"In terms of Office [competition], we don't run into Google a lot," says Microsoft's Tom Rizzo, director of online services. "If we run into competitors, such as OpenOffice or Google, we find it as a negotiating tactic for the customer, which is a good move on their part."
Rizzo likes to point out that Google's $50 per user per year price is not exactly all-inclusive. Google's Postini spam and virus protection comes with the Apps enterprise edition, but message archiving is an extra fee of $13 or $33 per user per year, depending on the length of archiving required. Additionally, third-party vendors have emerged to plug the gaps in Google at extra cost. However, many of the add-on tools available on the Google Apps Marketplace are free.
"The thought of Google Apps being totally free is a fantasy," DiDio says. "It might still be 50 to 75 percent less than Microsoft office, if you're looking just at the up-front capex cost, but there are costs associated with it along the way."
Customers must also accept a lower level of support than they would get from Microsoft, warns John Turner, network director at Brandeis University in Waltham, Mass. "The big joke is you have a problem, sure, go ahead and call Google. Where is that number again?" Turner says.
While Google's support is better than some people think, the company is not set up like a traditional enterprise vendor, Turner continues.
"They do provide us pretty decent support," Turner says. "For the most part they are very standoffish though. They don't want to hear about a deleted e-mail. They don't want to hear about a missing document. They're only there for major support issues, like when the service is down."
That's certainly one reason Microsoft still holds a giant lead in market share.
An IDC survey in July 2009 shows that nearly 97% of businesses were using Microsoft Office, and 77% were using only Microsoft Office.
About 4% of businesses use Google Apps as their primary e-mail and productivity platform, but the overwhelming majority of these are small and midsize organizations, according to a separate survey by ITIC. This puts Google well behind the open source OpenOffice, which has 19% market share, ITIC has found. (See related story, "L.A.'s Google Apps deployment eases budget, IT problems".)
But Google does have at least a small footprint that could help it expand. According to IDC, nearly 20% of businesses reported extensive use of Google Docs, mainly in addition to Microsoft Office rather than as a replacement. In October 2007, only 6% of businesses were using Google Docs extensively, so adoption is growing quickly.
Brandeis is implementing the full Google Apps suite this coming summer, in addition to its existing Microsoft Office deployment.
"The Google applications are pretty basic," Turner says. "They still don't really replicate that desktop experience."
Limited support for macros in spreadsheets, incomplete records management capabilities, the loss of formatting when importing Microsoft documents into Google, and occasional downtime have all been mentioned by customers and analysts as shortcomings of the Google Apps suite.
The ubiquity of Windows and the popularity of Windows 7 also work against Google, as Microsoft's Office tools are likely to have better integration with Windows than Google Apps does. And since most businesses already use the desktop version of Microsoft Office, customers interested in cloud computing may find it easier to switch to the Web-based versions of Office than to the Google suite.
"Because of wide application support, integration and interoperability considerations, and technical service and support issues, it will be hard for many enterprises to do a wholesale conversion to OpenOffice or Google Apps within the next 24 months," DiDio says.
Google recently updated the Docs application with some enterprise-class features, such as the ability to have 50 collaborators simultaneously edit a file.
Google Apps product manager Anil Sabharwal contends that few users will miss the extra features in Microsoft Office that aren't found in Google.
"There's a set of niche features that live in Microsoft Office that we acknowledge that we don't have in Google Docs, and we may never because they're so rarely used," he says.
When asked to identify those features, Sabharwal says, "I can't name them because I don't use them."
Sabharwal says Google has exceeded Microsoft capabilities in some areas, particularly with real-time collaboration and editing of online documents, in which all users see changes immediately and simultaneously. With Google, he notes, users can also work together without having to worry about what kind of operating systems are installed or licenses in use.
Google's main goals for the next year, he says, include increasing the functionality and number of Apps; maintaining simplicity and intuitiveness; improving IT administration tools including auditing, discovery and reporting; building secure connectors between the enterprise firewall and the Google cloud; and expanding accessibility across devices such as netbooks, smartphones, iPhones and iPads.
Microsoft isn't standing still, of course. The company has just released Office 2010 to manufacturing with more extensive Web-based versions of Word, Excel, PowerPoint and OneNote, and deeper integration between the Web-based and desktop versions of the software.
Microsoft Office Senior Product Manager Andrew Kisslo characterizes the Google features as rudimentary in comparison, joking in his blog that "the WordPad Team is very nervous" about the inclusion of a ruler in Google Docs.
Microsoft's online version of Exchange is very close to a desktop experience, Baldassari says, and Microsoft really distinguishes itself from Google when it comes to support, the main reason his company chose Microsoft over Google. (See Microsoft Office 2010's rivals: IBM, Zoho and Open Office.)
"Where Microsoft made the difference was really their approach to the enterprise world," he says. "The people we had in front of us clearly had more experience dealing with a corporation."
While Microsoft clearly has advantages, there is also frustration among CEOs over pricing and seemingly punitive licensing schemes, with perhaps enough discontent to spur widespread adoption of a less expensive alternative.
Microsoft is clearly worried -- to an extent, says Forrester analyst Sheri McLeish.
"Microsoft is very worried in the sense that Google has a lot of recognition, momentum and is putting a lot of dollars and effort into their newer business ventures that aren't related to search," McLeish says. "They're walking a very fine line. While they're nervous and worried, they're not nervous and worried enough to dramatically reduce the cost of Office. They clearly have some insight into their customer base and the potential risk they face. They're delicately managing the pricing to protect their margins."
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