Google and the Office game

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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.

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