Google and the Office game

50 Comments

googlecrosshairs.png

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.

50 Comments

Alex

I don’t believe Google is up for it just yet. They may be working towards acquiring a small percentage of the game away from Microsoft, but concerning any type of domination or threat would be far from what Google might actually do.

Google is against the odds at the moment due to the fact that many people don’t see a
“corporate-environment” type of presence from Google – and changing that would obviously be difficult if not handled correctly.

James

I sat through a seminar on this thing the other day. Semi-good presentation, reasonable enough product, enticing for sure but way to lacking for the corporate environment. The cost is $50 a person not business, so if a company had 100 employees that’s $5k per year not $50.

Still, compared to what it cost to do it in house that’s a bargain. But it also doesn’t factor in the risks involved in what amounts to simply trusting Google with your sensitive corporate data.

Charlie Sierra

If I were Microsoft I’d port Ruby to the dotNet platform and then buy 37Signals.

Now the folks in Redmond must also be hoping for a Google version of Quicken, so they can take another run at Quicken.

Matt Ellsworth

I’ve been using the google apps and docs now for a few months – i’m happy with it – but I wouldn’t pay $50 / year for what they are offering. Google docs needs to add a lot more features and get some bugs worked out before I’ll pay (i.e. make it so you can open a word doc with pictures – and have it work correctly).

But the $50/year if that is per domain name – that would work better than $50 per user.

Brad

“One mistake with business data, and that’s it.”

Bingo. People can argue about whether or not outsourcing corporate data is a significant security issue, but one lapse and the skeptics’ point is proven.

MeTheGeek

Hi Om,
I’ve been reading and enjoying your posts for a few months now. This is my first comment though.

I feel like finally the game is on! Google is competing with Microsoft at all levels, and winning in the most relevant ones. And it seems so much plausible than Linux vs. Windows!

Someone asked what the ppt equivalent would be. Well, the rumors about Presently should give you a hint.

Sergio

This is all hype! I can’t believe that everyone is so fired up about a collection of ‘office productivity’ apps from circa 1980’s. How about some impartial journalism?! Of course, most businesses don’t need the 99th degree of functionality, but the current suite of products is so archaic that it’s a joke–not a serious office suite. I mean, have any of you actually tried using these products in your everyday life? I have. I have an affinity for Google, so I once gave it a really good shot. I really, really tried to make it work, but the applications are horrible. They are awkward, slow, and lack the basic functionality that even a low-end user like me requires. Google couldn’t pay me $50 to use their so-called ‘office suite’.

I say enough with the blind hype. Do some real work and be a journalist not an echo chamber for Google’s PR department.

Spud

The gloves are off. Let the fun begin. Smart move by Google. Could this be another nail in Microsofts coffin?

anonymous

http://news.com.com/Microsoft%2C+BT+hook+up+for+hosted+apps/2100-7345_3-6161402.html?tag=nefd.top

I think this is a hosting play that is different from Microsoft Live or MSN.

Just like I said above. This is a good strategy by Microsoft.

Carriers can run this business. And every carrier out there wants to increase the ARPU. SaaS based apps provide the fuel.

If the pricing model is such that when user Joe pays Comcast $40 per year, Microsoft makes $10 – it works out.

We thought voice was commodity, now apps will become commodity.

Jeb

The only way I will ever consider moving over to Google is if they get a (better)CRM and their contact manager and (hopefully)CRM will sync with my phone (Symbian S60V3 Nokia E61). I won’t use something that won’t sync/work with my phone anymore.

Doug K.

Can’t believe they moved on this. I have been participating in the hosted service since they beta’ed it and the last month has been horrible. I haven’t been able to send an email longer then a paragraph and today it has been the worst. It took me 30 minutes to get out one email. I have been asking for assistance from Google for my email problem with the long emails for over a month with no response (other then some automated thing that recommended I try Firefox. I use Firefox! I tried IE instead with the same result.).

If they think that enterprises will accept poor performance in the same way that consumers do then they have another thing coming. This is basic customer service stuff!

  • Doug
Brian

Cant wait. I am a Fortune 500 Financial Analyst and am creating a P&L in Google apps. Google “analyzes” my data and finds a tax loophole in my data. So, up pops ads for a tax firm that handles these cases.

Googles privacy policy will NEVER give up any information its users store anywhere in the googsphere.

No way firms adopt this. Just one guys opinion.

Stanmiller

This is a classic case of a company losing focus. Google should be all about finding things – that’s what they do.

Productivity apps are boring and a distraction. How do you attract talent to work on those projects?

It’s also high-risk from a public perception standpoint. One mistake with business data, and that’s it.

Stephane

Is it just me or are other people sick of Google execs constantly lying to the market, the press, partners, analysts etc?

“We’re not going to launch a competitor to Office”, “We’re not launching a competitor to PayPal”, “We are a partner of Yahoo and have no intention to compete”.

Is anyone keeping track of the numbers of lies?

I mean, if Microsoft or anyone else was lying as often as they did, the entire world would call them Evil. But Google, no, that’s ok, you can claim that your mantra is to “do no evil” and then screw your best customers & partners by launching competing products at a loss, and, to add insult to injury, to lie to these people just before coming out.

GEvil. You guys are the next microsoft, just not the way you think you are.

Aswath

I would like to understand how Google or for that matter others price it based on storage rather than bandwidth consumption. Yes, I see that consumers understand storage better than bandwidth consumption. Using Amazon as a basis, storage caosts 10 cents per GB per month and bandwidth costs 20 cents per GB. So if I edit a document in multiple sessions, I probably consume more bandwidth, but I have not increased storage much. This suggests they have good statistics on the system wide average bandwidth consumption for a given storage.

william

This is not very impressive…..It just the same google hype…about business applications that can never be any better than the offering that is currently available from Open Office…..The cost of the Open Office solution per user is 0….and unlike the goolge offering it is open source…..this means that if your business needs to add some functionality they can do it….

The Adelph.us social network currently offers its members “Lightapp” the best business productivity application that is currently available….and it includes a presentation application….and all of the applications are compatible with Microsoft office….and it can be all be used online today for free…..

anonymous

P&G and GE are good names to put on the trial list. Heads will nod and GOOG will get few sales out of this marketing to get the wheels in motion.

However, I do not see organizations like P&G and GE saying we are going to take all of our Docs and Spreadsheets and move it to GOOG. Despite the amount of security and uptime – these large corporations will not do it.

SMBs will adopt this faster than Large Corps. This is where Salesforce.com started out first and its only in the last 12 months they secured accounts like Cisco and Dell. And SF.com is not out of glitches – remember the blowout of their service last year!!

GOOG should tie up with Service Providers – Comcast, AT&T etc. MSN has already tied up Verizon. This push is essential to get into the home user market and the SMB market.

Nevertheless in a few years we will see this business pose a disruption to Microsoft Office.

Rick

If I was a small business, I would love this offer. MS’s Office apps remind me of the old PageMaker publishing software. Most people don’t need the nth degree of functionality in MS Office.

Google offers the needed functionality with better collaboration and web-base. It caters to the 80% of the 80/20 rule.

Good analysis Om, this will erode MS’s business even if MS competes with Google online.

10 Years from now… bye, bye Microsoft as we know it.

akatsuki

The real issue is one of usage and convenience. I can’t even begin to count the number of hours wasted at my job “stabilizing” documents and the amount of lost work that occurs. What Google should do is send a team over to my office and observe people at work and the features they are using. I have a feeling that tech savvy companies are less likely to need to switch from MS than a law firm like mine where things often seem to be hanging by a thread.

sc

This is a fantastic move by Google. Office 2007 is not being easily adopted by most businesses. The older version works fine for most. This offer from Google will make it even less likely that users will upgrade to the newer MS Office version.

I’ve used Google Apps for domains (primarily for email and calendar), and (hope I don’t jinx it by saying this) I’ve never had a reason to call support. Email/form based support is usually very thorough and Groups answers most of the setup questions I have.

$50/user/year will be worth it to most organizations for just email alone.

This is likely to hurt other software vendors as well – for instance – Zimbra – which prices email much higher, will be forced to lower prices.

Also, if Google is able to tie interaction -mail, and calendar features like conversation threading, contact management and calendars, the value provided by Salesforce would no longer be valued at $25/user/month by its small business customers, but far less than that.

vanr

Once the big corps stop using MS Office and start using stuff off the web, there really isn’t any reason for them to buy Windows Vista – Ubuntu will provide the equivalent or superior level of desktop OS support for the average user.

The big corps will switch, because Google will eventually start to shovel in features that will enable a higher level of customization and control. And the really big corps will be able to run them off their own Google appliances for security reasons.

The enhancements in the pipeline for the top web browsers are going to start making most standalone apps look very weak in comparison.

Most of all, Microsoft isn’t going to drop their pricing, leaving MS Office as a premium play.

David Jackson

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.

Chandja

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!

jc

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.

petabro

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.

Prashanth

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.

?

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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