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In Part I of this series, I discussed the Google (NASDAQ:GOOG)/Microsoft (NASDAQ:MSFT) competition in the operating system space; this article will look at the Office Suites arena. Google recently announced their acquisition of QuickOffice, an Office suite for Android and iOS smartphones and tablets. This demonstrates the seriousness with which Google is pursuing the Office market. QuickOffice allows offline editing of files, something that Google will integrate within their own Docs products. Google will add offline editing capabilities to the desktop soon also, and Microsoft is rumored to soon be coming out with an iPad Office app. This means that Google and Microsoft will be competing across every platform: online, the desktop and mobile.

Google will be all out against Microsoft, but will they be able to gain a significant portion of the Office market? This is currently Microsoft's biggest profit-earner and it could potentially be a nice source of revenue for Google also. If Chrome OS gains a market share (as suggested in part I), people will use Google Docs on it, but what about on the current operating systems? People don't use their smartphones much for writing documents but they might start using their tablets more for it (especially if they have attachable keyboards).

While Microsoft will be coming out with an iOS Office app, their delay has allowed other apps to gain traction. Since people seem happy with their current Office apps, Microsoft will probably not be able to take over the market, so there will be a split between Microsoft's Office, Apple's iWork (NASDAQ:AAPL), Google's QuickOffice and other offerings. If Office usage on the tablet bites into its usage on the PC, this will cause a loss for Microsoft.

However, it seems that the PC will remain the main productivity device for a while, since it is hard to do work without a keyboard or on a small screen. Will Google be able to gain market share on the PC? At first glance this seems very difficult. Microsoft's current dominance means people are both used to the program and will need to deal with the Microsoft file formats. In addition, Microsoft has spent many years developing their Office software, so it will be difficult to be able to match the number of features they provide. Will Google be able to offer capabilities that will get people to switch?

On one hand, the amount of features in the Office suite is not so important to most people. They just need Word for basic document editing, and they don't know about or need most of the complex features. Even a basic thing like styles is pretty complex on Word and is not used by a large number of people. Excel is feature-packed for people who need it, but most people just use it for managing tables and lists and doing very simple calculations. In fact, the reason Excel 5 was able to successfully beat Lotus in the early '90s was because it handled lists well, while Lotus was too focused on complex modeling (see this post by Joel Spolsky). If much of the complexity of the Office suite is not relevant to most people, than Google Docs may be able to gain a large share by making the simple things a little better.

However, while most people use only a small subset of features of Word or Excel, each person may have a different feature that they use. This post on a Microsoft blog mentions the wide range of features that people use in Office. This means that if people switch to a simpler solution, they may have to give up use of a certain "pet feature" of theirs. The only way they would do this is if Google offered certain fundamental features that made it worthwhile for people to switch.

It seems that Google might be able to do this in a couple of ways. One way is by providing a faster and simpler interface for people to use. People might prefer a simpler app with less features to the vast complexity of Office. It is already quicker to begin editing a document in Google Docs than in Office Web Apps, and Google is very good at keeping things fast. Another area is online collaboration. While Microsoft caught up in allowing simultaneous collaboration, Google Docs still remains very simple to use and one can see simple colored cursors where collaborators are editing things.

Another area is version control. People might want to be able to go back and restore previous versions of a document, but Microsoft does not provide a simple way for a regular user to do this. In Google Docs, one can easily compare a document with earlier versions and restore previous ones. If Google can expand the capabilities of their "version history" while still keeping it easy-to-use, people might find it very useful. Currently, many people just save multiple version of their Word documents, which is obviously not the best way to do things.

A potential advantage for Google is connected to their strength in search. Google recently connected their spellchecker to their web service, which shows some of the capabilities of a smart search engine. Google Spreadsheets has a search that lets people easily use scripts without having to code it themselves. Google may be able to launch a feature that lets people search to do something and then let them actually perform it in one-click without having to read through complex instructions. Microsoft's help search in Office isn't very good at determining what a user wants to do, but Google is very strong in this area. Imagine being able to remove duplicates from a column just by searching "remove duplicates" on the side of a spreadsheet!

These are basic features which would be useful to a very large number of people, not just a specific niche. Google seems to have an edge in these areas, so if they improve further to make them more powerful and easy-to-use, this may help them gain a large share of the market. Just as Office was able to beat Lotus by improving basic features that everyone used instead of focusing on complexity, Google may be able to do the same to Office. Or at least they will be able to gain a larger share of the market.

This threat to the dominance of Office is a serious threat to Microsoft's profits. They face some immediate risks from the growth of the tablet market and longer-term threats from the potential growth of Google. They will likely lose a significant portion of the consumer market to Google Docs, since many people will be satisfied with Google's free offerings, and will not see the need to pay for Office. In addition, many consumers already use Gmail, which integrates well with Google Docs. This familiarity of regular users with Docs may then cause businesses to also begin using the Google business suite (Google Apps). This growth will allow Google to diversify its sources of revenue, and could cause a large loss of revenue for Microsoft. The potential threats to Office and Windows make Microsoft a risky stock to hold onto long-term.

Source: Microsoft Vs. Google, Part II: Can Docs Beat Office?