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Google (GOOG) has taken aim at one of the two biggest Mister Softee moneymakers.

On Thursday, Google, the Internet search giant, will unveil a package of communications and productivity software aimed at businesses, which overwhelmingly rely on Microsoft (MSFT) products for those functions.

The package, called Google Apps, combines two sets of previously available software bundles. One included programs for e-mail, instant messaging, calendars and Web page creation; the other, called Docs and Spreadsheets, included programs to read and edit documents created with Microsoft Word and Excel, the mainstays of Microsoft Office, an $11 billion annual franchise.

Unlike Microsoft’s products, which reside on PCs and corporate networks, Google’s will be delivered as services accessible over the Internet, with Google storing the data. That will allow businesses to offload some of the cost of managing computers and productivity software.

There can be no doubt that Microsoft has a dangerous rival in Google, but it's more than a mere business challenge - it's a philosophical one, also. The battle is between Microsoft's approach of owning a stranglehold on desktop computing, versus Google's massive online server cloud accessible by any user, anywhere, no IT dept. necessary.

As we noted previously, adaptation of both Vista and the new Office have been slower than expected; indeed, it's hard to describe it as anything short of a disappointment. Google obviously recognized this softpoint and decided it was an opportune time to pounce. Very Sun Tsu of the not-so-genteel Google boys: Always take advantage when your adversary is weakened or vulnerable.

This is a potential paradigm shift. Do the math, and you will understand why:

While most analysts say that businesses will increasingly use software delivered over the Internet and supported by advertising — a formula that Google has mastered — they are split over the threat that Google’s offering represents to Microsoft in the near term.

"I think Microsoft should be very concerned about this,” said Rebecca Wettemann, vice president of Nucleus Research.

Ms. Wettemann noted that a business may spend about $80,000 on a systems administrator to manage e-mail and desktop office software. For the same amount of money, Google Apps allows a business to support 1,600 users, she noted. Simply in terms of staffing, “this may be a better proposition even if Microsoft were free,” Ms. Wettemann said." (emphasis added)

A better value proposition than free Microsoft. Now that's a tough gig to beat (even with Googler's egregious boilerplate).

Critics will note that the Fortune 500 are unlikely to adapt this. After all, Windows XT was called the IT Department Full Employment Act, and well paid CIOs are unlikely to put themselves out of a job.

It is also true that the growth segment of business and computing is NOT the Fortune 500; rather, it's in the small start up, the entrepreneur, the solo practitioner. This is the area where Google can lay a pretty decent hurting on their older, less nimble rival.

Is Microsoft the next Blockbuster Video (BBI)? I doubt it. They have too much cash, too many franchises, and too many sharp people to be totally marginalized. But I also very much doubt they are the next GE (GE), a company that has managed to evolve and reinvent itself repeatedly over the course of more than a century, and remain a top layer in numerous niches. Not Blockbuster, not GE, but somewhere in between (if anyone has a perfect corporate parallel, let me know in comments).

Whether Microsoft can do the same, whether they can adopt their monopolist business model to something that thrives on competition, has yet to be seen.


Source:

A Google Package Challenges Microsoft
MIGUEL HELFT
Published: February 22, 2007
http://www.nytimes.com/2007/02/22/technology/22google.htm

Source: Google at Cost Better than Microsoft for Free?