Weekly Update

Google is planning to steal Microsoft’s future

A few new indicators have popped up, showing that Google is going right after Microsoft’s jugular: enterprise email.

The most clear cut indicator is new stats mined by Dan Frommer, showing that Microsoft dominates the Fortune 500 — and presumably, other large and multinational corporations — but in mid-size and start-ups, Google has the upper hand.

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As Frommer points out, Google is the only Fortune 50 company with its email records pointed at Gmail:

Among the mid-size companies, almost 60% host their email with Google, including corporations like Twitter, Dropbox, Box, Airbnb, Square, Uber, and EtsyAnd among the Y Combinator startups—mostly very small companies with some funding, but often tight budgets—92% host their email with Google.

This is the big challenge for Microsoft: how do they continue to milk the cow — the large corporate customers, that are tightly tied to Microsoft’s platform for email and productivity, like Word, Excel, and Powerpoint — and still get out to chase the mid-sized companies that are its future?

The answer? They can’t. Or at least, they aren’t doing it hard and fast enough to be dominant in these other sectors.

A follow-on question: what would they have to do do get ahead of Google? Microsoft’s numbers show that Office 365 subscription sales are up 0ver 100% from last year, but licensing software — like Microsoft Exchange — is flat.

Google is developing a number of channel partners to attack Microsoft in the enterprise, as well. Last week, Spring and Google announced a new partnership that allows Sprint to sell Google Apps for Business, which includes Gmail, Google Calendar, Google Drive/Docs, and other Google products and services.

Obviously, Sprint would like to sell this to more than existing enterprise mobile customers, enticing new companies into the Sprint fold. Vice versa, this could open the door for companies to look at a new option, because many small businesses may not have considered Google’s services before.

Google’s goal is to get SMB penetration, and through that — in time — everyone. As even the largest companies decide to move to Email-as-a-Service, Microsoft will have to work hard to convert existing Exchange/Outlook customers to Office 365, and to make the value proposition for smaller companies compelling.  We’ll have to see if Nadella and company can pull it off.