It has taken years, but Google seems to be cutting into Microsoft's stronghold - businesses.
software for businesses,Google Apps, consists of applications for
document writing, collaboration, and text and video communications - all
cloud-based, so that none of the software is on an office worker's
computer. Google has been promoting the idea for more than six years,
and it seemed that it was going to appeal mostly to small businesses and
But the notion is catching on with larger
enterprises. In the last year Google has scored an impressive string of
wins, including at the Swiss drug maker Hoffmann-La Roche, where over
80,000 employees use the package, and at the Interior Department, where
90,000 use it.
One big reason is price. Google charges $50 a year
for each person using its product, a price that has not changed since it
made its commercial debut, even though Google has added features. In
2012, for example, Google added the ability to work on a computer not
connected to the Internet, as well as security and data management that
comply with more stringent European standards. That made it much easier
to sell the product to multinationals and companies in Europe.
companies that sell software over the cloud add features without
raising prices, but also break from traditional industry practice by
rarely offering discounts from the list price.
suite of software, which does not include e-mail, is installed on a
desktop PC or laptop. In 2013, the list price for businesses will be
$400 per computer, but many companies pay half that after negotiating a
At the same time, Microsoft has built its business on
raising prices for extra features and services. The 2013 version of
Office, for example, costs up to $50 more than its predecessor.
is getting traction" on Microsoft, said Melissa Webster, an analyst
with IDC. "Its 'good enough' product has become pretty good. It looks
like 2013 is going to be the year for content and collaboration in the
Microsoft has also jumped on the office-in-the-cloud
trend. In June 2011, it releasedOffice 365, and now offers its software
in both a cloud version and a hybrid version that uses cloud computing
and conventional servers. Office 365 starts at a list price of $72 a
year, per person, and can cost as much as $240 a person annually, in
versions that offer many more features and software development
capabilities. Microsoft says it offers more than Google for the money,
but the product has not won many converts from Google.
In a recent
report, Gartner, the information technology research company, called
Google "the only strong competitor" to Microsoft in cloud-based business
productivity software, though it warned that "enterprise concerns may
not be of paramount importance to the search giant."
tight-lipped about how many people use Google Apps, saying only that in
June more than five million businesses were using it, up from four
million in late 2011. Almost all these companies are tiny, but in early
December Google announced that even companies with fewer than 10
employees, which used to get Google Apps free, would have to pay.
revenue from Apps, according to a former executive who asked not to be
named in order to maintain good relations with Google, amounted to
perhaps $1 billion of the $37.9 billion Google earned in 2011.
Industries, a carpet maker in Dalton, Ga., with about 30,000 employees,
switched to Google Apps this year for communication tools like e-mail
and videoconferencing. Jim Nielsen, the company's manager of enterprise
technology, calculated that using Google instead of similar Microsoft
products would cost, over seven years, about one-thirteenth Microsoft's
Shaw is a subsidiary of Berkshire Hathaway, run by Warren
E. Buffett, but the close friendship of Mr. Buffett and Microsoft's
founder, Bill Gates, did not sway Mr. Nielsen. "When you add it up, the
numbers are pretty compelling," he said.
In addition to the lower
price, Google has simplicity in pricing. Mr. Nielsen said he had to sort
through 11 pricing models to figure out what he would pay Microsoft.
his prime motive in choosing Google, he said, was online collaboration.
"As people in their daily lives become more electronically social, they
want to bring that into the office," Mr. Nielsen said. "Video is more
appealing than a written letter."
Google, he said, is "constantly making it better for teams to work, inside and outside the company, with controlled access."
says it does not yet see a threat. Google "has not yet shown they are
truly serious," said Julia White, a general manager in Microsoft's
business division. "From the outside, they are an advertising company."
In 2011, 96 percent of Google's revenue came from advertising.
though Microsoft sells a similar product, she said most companies did
not want to depend exclusively on clouds for documents and
communication. Microsoft now has some of its own workers entirely
online, she said, while others use both local computers and the cloud,
to get a feel for how various companies work.
Although she would
not break out numbers, Ms. White said Office 365 was "on track to be our
fastest-growing business." She said that Google, to be a threat, would
need to "provide a quality enterprise experience" in areas like
"privacy, data handling and security."
But according to the
General Services Administration, out of 42 federal government contracts
for which Google and Microsoft competed in 2012, Google won 23 deals,
and Microsoft 10. The rest went to another company, Zimbra, which is
owned by VMware, a maker of cloud software.
and most profitable sector, its business division, brought in nearly $24
billion in the 2012 fiscal year that ended in June. Almost none of that
came from Office 365, but from the familiar older-style software that
depends on computers located within the corporation.
As the two
behemoths slug it out in the enterprise market, their cloud-computing
software is changing the way businesses operate. Internet-based
computing makes it easier to communicate both within and outside a
company. Fixing software and adding features can be done automatically,
the way consumers get the latest version of Facebook when they go to its
"People were looking for cheap e-mail at first, but now
it's about collaboration, calendaring and data storage online," said Ms.
Webster of IDC. Over time, her firm says, software revenue will be at
least 50 percent from the cloud, which could challenge the complex way
Microsoft prices and discounts its products.
Ms. White, the
Microsoft manager, said Google "helped amplify a lot of the conversation
around cloud productivity." That is a far cry from last February, when
Microsoft put a video on Google's YouTube Web site lampooning Google
with a parody of the old television show "Moonlighting."
the video suggested, would automatically change around a buyer's
software. But cloud-based software is supposed to issue automatic
updates and feature changes. Microsoft has issued several updates to
Office 365, though, unlike Google, it lets customers delay the changes
for up to a year.
© 2012, The New York Times News Service