Back in June I spoke about the corporate blogging project that I co-run with The Rights Marketing Company. Called Micro Media Corp, it's a corporate blogging and podcasting program that aims to give business people insights into the Web 2.0 and New Media worlds. Our first major customer is British Telecom and we're currently in expansion mode. We produce 3 blog bulletins every week and they are written by top quality bloggers (some of who you'll be familiar with) - Scott Karp, Taewoo Danny Kim, David Stoughton (a UK consultant), Steve O'Hear, Stephen Danelutti, Cale Hollingsworth and Rudy De Waele. I'm the managing editor of the Micro Media blogging program, so I set the topics and edit the bulletins.
If your organization is looking for regular thought leadership in the Web 2.0 and New Media world, email me and I'll send you subscription details.
To give you a taste of what Micro Media is all about, here is a bulletin that we did back on 30 August 2006. The topic is still very relevant and I can assure you there are some excellent insights inside this bulletin. Check it out...
Google Office (a Micro Media bulletin from 30 August 2006)
This week Google launched Google Apps for Your Domain, a software service aimed at small and midsize companies. It's a free, ad-supported package which combines Google's E-mail, calendar, instant messaging and HTML editing software. Although it'll be hosted by Google, customers can brand the service with their own domain names. What's more, it may be just the beginnings of a Google Office according to this InformationWeek article:
"Later this year, Google plans to add its Writely word processor and Google Spreadsheets to the suite, build online collaboration features that work across its applications, and market the whole package to large companies for a fee. Google will include IT-friendly features such as APIs, directory-server integration, guaranteed performance levels, and telephone tech support."
We asked the Micro Media bloggers to analyze this latest enterprise development by Google. Is a potential threat to Microsoft Office?
Google's offline weakness - Steve
Steve: "Google remains non-existent with regards to off-line functionality (Microsoft's main stomping ground). Because we are still a long way from reaching the goal of ubiquitous Internet access, this in my opinion is Google's enterprise deal breaker."
Google will win over small businesses first - David Stoughton
David S: "The capture of a substantial portion of the small business market, coupled with their demonstrable ability to evolve products rapidly, will be enough."
The real battle will be fought over data - Scott
Scott: "When it comes to data, Google's reputation among businesses is an increasing liability."
More of a complementary relationship than a battle- Taewoo
Danny: "Rather than a battle between Google's apps vs. Microsoft Office for the throne, I think if anything this is going to produce a more complementary relationship."
Steve begins by outlining the pros and cons of Google's office plans, citing off-line access as a key point against Google right now. David thinks that Google will gain a foothold in small businesses and emerging markets such as China and India - which will be the platform into the larger corporate market in the long-term. However Scott argues that data storage and Google's relatively poor reputation in that regard is their archilles heel. Danny concludes by wondering if Google's online and collaboration office products will complement, rather than usurp, Microsoft Office.
While Google's 'office' offering will be attractive to small businesses, partnerships, and freelance workers (like me), I don't think it's currently a credible threat to Microsoft's enterprise stranglehold. To start with, embracing online applications and storage has serious privacy and security implications. As Om Malik points out, a quick read of Google's privacy disclosure is enough to temper any initial enthusiasm for Google's offering. The passage that says that Google can "change your account password, suspend or terminate your account access and your ability to modify your account" as well as access "your email, contacts and other information" is particularly disconcerting. Obviously, any ISP probably has the same terms and conditions - but an enterprise would usually own and control its own servers, to ensure confidentiality. Having said that, Google could easily solve this part of the puzzle by offering a way to install their applications on an organisation’s infrastructure - much like the Google Search Appliance.
Secondly, and perhaps most crucially, the Google suite of apps just isn't yet up to the job - so for the time being, complements Microsoft Office rather than replaces it. Microsoft is weak on collaboration, and it's here where Google excels - users can import Microsoft documents into Google's service in order to collaborate with co-workers online. However, Google remains non-existent with regards to off-line functionality (Microsoft's main stomping ground). Because we are still a long way from reaching the goal of ubiquitous Internet access, this in my opinion is Google's enterprise deal breaker. Microsoft, on the other hand, is much better positioned to play catch up and is betting on the success of Office 2007 and its associated server offerings - which include collaborative functionality. In contrast, there is no sign of Google addressing its off-line problem - although, by providing APIs, Google may be laying down the hooks for a third party to solve the problem for them. What's really required is a desktop application that can access, synchronize and edit Google-created (and stored) documents - Sun's StarOffice maybe? Google and Sun are, after all, already in partnership.
That's not to say that Google's move into the online 'office' space (along with other new entrants such as Zoho), isn't already highly disruptive. The immediate effect has been to serve as a wake-up call to Microsoft - and this was very much reflected in the recent speech given by new Chief Software Architect Ray Ozzie, who spoke about how important Windows Live is to the company's future. In the long term, the transition away from purely desktop applications and local storage, to a world where our applications and data 'live in the clouds', isn't just reflecting (and reacting) to the move to a decentralized (and global) network economy - but is, in actual fact, helping to drive it.
Much of the speculation surrounding Google's release of Apps for Your Domain for the personal and small business market, and their future plans to attack Microsoft's base in the corporate market, seems to embrace perspectives that are both too short-term and too narrow in their focus. In fully evaluating the impact of the announcement, it is important to embrace potential developments over quite a long timeframe; perhaps as long as five years. The expected rapid growth in key developing markets - especially India and China - will also be critical.
The immediate response from smaller users is likely to be rapid and extensive, especially in developing markets. A number of factors combine to drive this. It is probable that these users follow the generic pattern uncovered by research into software use. This suggests that they will only ever use a maximum of 40% of the features of Microsoft Office - and as few as 16% on a regular basis. In India, where I have had first hand experience, the mind-set is that the [Microsoft] product is far too expensive by local standards and that they are being asked to pay for redundant functionality. They think it's functionality that western users may value, but in India they don't need.
Indeed, for sole traders and small businesses, office software is potentially their single biggest start-up cost. As a result the vast majority of copies, perhaps as high as 90%, are pirated. Something similar, I'm sure, can be found in China. And all personal users - even in the West - find prices challenging. Additionally, since they have no supply chain management systems and few customer facing tools, small businesses value collaboration highly - but are unlikely in the extreme to buy a more expensive version of MS Office, that also requires server software and potentially more hardware.
On the other hand, as most pundits note, large corporate users are not likely to convert in a hurry. Most of the reasons have been thoroughly aired - security, off-line functionality, connectivity and interoperability, as well as sheer corporate inertia. So, like Sun with Star Office and others before them, Google is not likely to make much of an immediate dent. But, unlike Sun which has no installed base among small users, strategically Google doesn't need to; they just need to demonstrate the possibility. The capture of a substantial portion of the small business market, coupled with their demonstrable ability to evolve products rapidly, will be enough. Because this is a classic disruptive play and Microsoft is following the classic strategy of the incumbent.
"Microsoft...plans to sell higher-priced versions of Office plus add-on servers with built-in collaboration features when it launches Office 2007 later this year", reports Aaron Ricadela in InformationWeek. To be explicit, Microsoft will continue to add functionality - and incidentally price - in order to outflank their opponents. The result, unless Microsoft changes course, is a foregone conclusion.
Small businesses are tomorrow's bigger (and legally compliant) customers, and the speed of growth in India and China can be spectacular. By the time they grow up, Google's apps will have evolved with them and be perfectly adequate for their needs. The same inertia that holds back big business now will then start to work in Google's favour. Meanwhile the inexorably rising Total Cost of Ownership associated with Microsoft products, and the fact that individuals in any given organisation will progressively adopt Google apps for personal use, will prompt some big organisations to migrate. Already many governments question whether the cost of Microsoft based systems is justifiable - so a real, viable alternative will make this an issue of good governance for commercial organisations too. Given the current strategic landscape, I don't see the result as being in doubt - the only unpredictable factor is the timeframe.
The war between Google and Microsoft will have many fronts; including functionality, standards and interoperability - but I don't think any of those will be decisive factors. The real battle will be fought over data - where it is stored, how it is secured, who owns it, and who can access it. Blogger Om Malik, who launched a media company around his blog Gigaom.com, looked at deploying Google Apps for Your domain for his own company - but then he read Google's privacy disclosure and decided against it.
When it comes to data, Google's reputation among businesses is an increasing liability. Growing concern over click fraud, Google's new inscrutable landing page quality score, and Google's constantly changing search algorithms that impact so many small businesses - has left many companies feeling like Google is just one big black box. Google has given companies little reason to believe or trust that it's playing fair with the data inside that box. As a result, there has been a strong current of resistance to adopting Google's Checkout feature - according to a recent informal survey, "81% of the online retailers indicated that they probably will not implement Google Checkout primarily due to the concern about ceding customer ownership to Google." The concern here is not just over who controls the customer relationship, but who controls the data. I did my own informal survey of advertisers at the recent Search Engine Strategies conference, and the universal view I heard was an adamant refusal to hand over sales data to Google - for fear that Google will exploit the data to raise search advertising prices.
This is not exactly the reputation that a Software-as-a-Service provider wants to have. I've heard the argument that many businesses probably do a poor job securing their data, so they would probably be better off letting a third party secure their data for them - just like they put their cash in the bank. But I think perceptions will be the key driver of business decisions to adopt Google' SaaS offering - businesses need to feel that their data is not only safe from theft, but also safe from exploitation by the company that is storing it. I think many companies will see the full adoption of an SaaS model for all their business applications akin to handing Google the keys to the business.
For the smallest companies and in emerging markets, as David points out, this may be less of an issue - so Google may well be able to secure a foothold. But as concerns over data and privacy grow, Google may hit a wall where entrenchment in Microsoft platforms is driven by more than just inertia.
In addition to control of data, the other big issue that will limit Google and the SaaS model is offline access. With Boeing having recently thrown in the towel on its in-flight Internet service, the inability of business travelers to access SaaS applications while on a plane will be huge barrier. One day in the not too distant future, the entire world will be covered with a blanket of Internet access - everything and everywhere will be wired - but we've still got a long way to go. Just as computing can't function without ubiquitous electricity, Google can't displace Microsoft's client application model until Internet access is also ubiquitous.
Taewoo Danny Kim
This move by Google has been a long time coming. Google has been building up its stock of online office applications, so it's no surprise they're aiming to do an office suite. It also means the much anticipated Google vs. Microsoft battle is upon us. My take on this is quite different from many though: rather than a battle between Google's apps vs. Microsoft Office for the throne, I think if anything this is going to produce a more complementary relationship. I've been using Google's online apps along with Microsoft Office 2007 beta version - and I have concluded that Google's apps won't be able to catch up with the ease and deep functionalities of MS Office. On the other hand, even with the use of SharePoint, I don't think Microsoft can offer the same level of collaboration as Google. Accordingly, they'll have different customer sectors and play nicely alongside each other.
However, I still view this as a battle over the computing platform - a much larger and fundamental one. Google's ambition lies not only in organizing all the world's information, but also making the entire application world an online one. Meanwhile Microsoft is still trying to maximize the opportunity to "connect" its PC platform to the Web. Google has garnered many benefits by being a pioneer in the online app world - search, collaboration, mash-ups, etc. On the other hand, it is also the first one to face the various problems of the online app world too. Control over data, privacy, and reliability of the services are a few such examples. Microsoft, as usual, is cautiously watching from behind and taking its steps slowly.
Just like Microsoft, which needs to transform its image into a "consumer-friendly" company (as we talked about in the Zune article) Google also has to transform its image from a mere search company into an "application company" too. After all, as noted in this BusinessWeek article, Google has not been overly successful at creating applications. Moreover Google's competitors, most notably Microsoft, are catching up in the online app world - following the exploration already done by Google. For example, Richard noted in his blog that Windows Live is now among the top 10 ranked sites on Alexa.
This is a gigantic shift we're witnessing right now in the software industry. There are a great number of problems and issues to be solved; but there are even more opportunities to be explored. What's exciting is not just the Google vs. Microsoft battle, as many of us can easily fall prey to pondering, but rather that there's so many things that could happen - and most of that is going to depend on Internet technology and imagination. Of course more competition and more changes are always good for us consumers, because we'll have more options and innovative products to use!