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Summary:

Google has always denied that it has any ambitions to take on Microsoft’s flagship and very lucrative Office business with its online apps. Not anymore.Fortune magazine “outs” Google’s office ambitions. The company has launched a paid version of its documents, spreadsheets, calendar and email programs, the […]

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Google has always denied that it has any ambitions to take on Microsoft’s flagship and very lucrative Office business with its online apps. Not anymore.Fortune magazine “outs” Google’s office ambitions. The company has launched a paid version of its documents, spreadsheets, calendar and email programs, the magazine reports.

Here are some of interesting facts:

  1. 100,000 small businesses are running a trial of what is Google Office.
  2. The paid version will cost $50 per account per year and will get the buyers 10 gigabytes of storage and telephone support.
  3. Google’s Dave Girouard claims that at $50 a year, Google will make money.
  4. General Electric and Proctor & Gamble are running small trials of these applications.

Bottomline: It is an interesting chess game going on between Google and Microsoft. Redmond can use OS to become a reasonable force in search, thanks to the inertia of the masses who don’t change default search engines. Microsoft wants a piece of the ad revenue. Didn’t Bill Gates recently say that advertising is a viable business model for software vendors. Ergo Windows & Office Live!

Google knows all that, and rightfully worries about it. It counters with an equally devilish move.

Google’s strategy is to totally commoditize the market, try and take away pricing power from Microsoft and try and put the megabillion dollar a year “Office” business division on the defensive. Why? Even if Google manages to convince a million small businesses to sign-up and pay $50 a year, it would still be a $50 million a year business that wouldn’t move the needle as far as revenues are concerned.

What will Microsoft do? Lower the price on Microsoft Office? If they do that, then the cash cow business is hurt. Wall street is not going to like that – given that Vista revenue machine isn’t going to really rev till end of 2007/early 2008. Will Google be successful? Who knows – it is fun to watch though!

Information Week has the full lowdown with comments from most of the well known software analysts.

  1. OM,

    I wonder what kind of “support” you can get for $50 these days..

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  2. Google had to make this announcement after Viacom blow.

    What’s new here? No PPT equivalent software! 0ff-line access? Privacy?? Security???

    The only thing I found interesting about this announcement that GE & P&G have signed up for trials. Google must given them few shares & promised to run free ads!

    But, it will be interesting to watch GOOG stock when it opens!

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  3. Om,
    If Google convinces a Million small businesses owners to pay, it will be a lot more than $50 million. Google Apps are billed $50 per user account so if a business have some say 50 employees it would be a total of 2.5 Billion.
    Thats a serious dent for Microsoft Office Division.

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  4. Google is primarily a “broker” of advertisements. I wonder how much of the $50 is part of a package that includes the total spent by the customer on advertising and other potential services.

    I also wonder how much discount Google gave PG and GE (NBC) on their web ads to permit their names being used for the story

    Ballmers “warning” to the street a few days ago could have been a premptive measure in anticipation of this announcement.

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  5. [...] more, check out GigaOm, which offers up an interesting fact box about Google Apps, including the fact Google can make [...]

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  6. I think they are simplifying things a bit too much…Most businesses have integrated office into other busniess processes, from document management to supply chain. I think you simplify the enterprise market down to a few paragraphs.

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  7. Hi!

    My comment is not really related to your post. I am a Mass Communication and is currently working on an article about web office. I am already desperate because I don’t have enough informations about web office. Can you help me with it by answering my questions? Your answers will be of great help to me. My questions are: What is web office all about? How do we access it? who are its target customers? what benefits can we get from using it? and what are its advantages and advantages?

    Thank you so much!

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  8. Chandja: Just go to http://docs.google.com and try it for yourself.

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  9. Quick correction to your post: the 100,000 number that Google provided refers to the number of small businesses currently using the free version of Google Apps, not a trial of Google Office. Also, Google released this widely to the press; I don’t think Fortune “outed” it. See the list of others reporting on the story here.

    More important, I wonder whether you’re underestimating the long term revenue impact for Google. Sure, $50 per year per firm won’t generate much money, but what’s the chance that Google raises the price as users become locked in, and raises it further by moving to per seat pricing.

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  10. [...] Google and the Office game [...]

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