Google Is Preparing to Unleash the Cannibals on Microsoft

As the battleground between Microsoft (MSFT) and VMware (VMW) takes shape with the launch of Microsoft’s Hyper-V, I’ve talked about what VMware should do as well as how Hyper-V could prevail.  While this is a critical battle for both companies, it is only a precursor for Microsoft as Google (GOOG) looks to be launching the cannibals of commoditization at Microsoft’s core applications.

Yesterday morning, a very interesting article on online office applications appeared in Computerworld.  While the article by David DeJean is a feature assessment of three online office applications (Google, ThinkFree and Zoho), the strategic implications of these innovations become obvious in the first paragraph:

For quite a while, Web-based suites — which offered word processing, spreadsheets, presentations, and other tools associated with desktop office suites — were extolled not because they did these things well, but because they could do them at all. But the three major competitors, Google Docs, ThinkFree, and Zoho, have all made major improvements in recent months. They’re becoming both broader, with more applications, and deeper, with more features and functionality in existing apps.

This takes me back to a Computerworld blog discussion and Nicholas Carr’s new book The Big Switch.  Carr argues in The Big Switch that enterprise IT is about to get sucked into the cloud of utility computing, similar to how electricity production went from strategic industrial age differentiator to ubiquitous commodity as access spread and service providers expanded their coverage.

That switch would be a major disruption to the likes of Microsoft, as the world of massive shrink-wrapped and pre-installed software for ever larger hard drives has been very good to the Redmond Empire.  It has allowed Microsoft to bundle its way into waves of innovations while crushing rivals.  Its ability to assimilate and crush reminds me of Ancient Rome.

As I mentioned a couple days ago in Microsoft Unleashes the Cannibals, cloud computing gives new entrants the ability to deliver software as a service and change the economics of the software industry.  And I think that both Microsoft and Google are well aware of the enablers, the potentials and the new stakes.

I think Microsoft is bracing for the first formidable cannibal assault on its core suite of applications.  Yes, Google may do to Microsoft what Hyper-V is attempting to do to VMware and what Microsoft has done to others for decades.  The outcome of this assault promises to change the critical requirements of enterprise computing, spur new innovation and make computing more affordable and accessible for even more users.

Clearly Microsoft is a well-funded empire populated with a lineage of brilliant strategists/generals.  It won’t go away.  But I think it will have to adapt to the switch as Carr calls it; and the way it fights off cannibalization will impact Microsoft, the software industry and the world of computing.

With software from the clouds will come new demands, new players and new opportunities.  Appliances that enhance security in the clouds, make compliance more manageable, and enhance flexibility and control will become even more strategic.  Specialized hardware and ASIC races between various “one trick pony” category players will become increasingly uncommon.  Service providers will ultimately out-innovate many enterprise data center teams.

I think this process is already underway, as some enterprises have already started commoditizing their shops, outsourcing certain roles, and establishing ever more bureaucratic technology evaluation committees.  Security pundit Chris Hoff may blame analysts for quashing innovation, but I think enterprise IT is under even more scrutiny for justifying innovation.

Google’s cannibals will also likely impact more than Microsoft.  They may transform the increasingly reactive and incrementalist IT industry already juggling legacy purchases with emerging new demands under increasing resource constraints.  They may force change at a critical time for the IT industry.

The shift to cloud computing could unleash an explosion of innovations in applications, application delivery, core network services, traffic management and security.  It promises a new generation of technology leaders, opportunities and market dynamics and perhaps even new types of service providers.  No doubt Microsoft will survive and ultimately thrive; the real question is what its business will look like after the aftermath of its coming battle.

You can read my disclaimer at About Archimedius.

Comments

[LM]

I continuously try all the web-based applications and have yet to find one that has the ease of use and functionality of basic Office 2000 (i am an avid Google Docs user however, more for in-house needs not for any outbound customer communication like one would do with MS Word or Excel).

The cloud is growing but it seems to be just a slight drizzle, the showers are still on the horizon.

[heirbrande]

Google is the new Microsoft- BUT- I hate to see Google squashing even the little guy. It's hard these days, for garage-programmers to come up with anything that Google doesn't have in "beta". At least with Microsoft, you just had to beat their next product launch. With Google, you can be wiped out in just a few days. What happened to all of the would be "Mesh Wireless" companies in California? They got scared away by Google's municiple wifi. scary. Probably not as scary as Google's patent application (International) # 20070130580
appft1.uspto.gov/netac...
This allows Google to snoop on you conversations and put ads on your TV based on what was said. NOW, ISN'T THAT A GREAT IDEA? The y say it will HELP us find things better and is good for everyone ...
Outlash from Googgle's ambient noise listening device:
www.techcrunch.com/200.../

Google will also will rob you of your idea if it's worth enough. Gee I remember this company's product long before Google got interested in it: www.reuters.com/articl...

[MarcelMcSweeney]

You forgot to make a metaphor to Cleopatra and Achilles heel? I thought it was Microsoft that had an imagination that was showing signs of failing?

[amywohl]

Everything has its time and the cloud's time has come. It will not be the answer for everything, but it is likely to be the answer for many things. Five Hundred Million Microsoft Office users won't be lightly brushed aside, but the tools of choice for users on new devices and in newly emerging markets are more likely to be in the cloud and more likely to be from we-based ISVs who have no traditional software to protect. Much will change -- and on the other side we will find the advantages to be gained and regret what we left behind.

[p. smith]

The only software companies that are not to be crashed are the ones offer software/consulting/pr... technolology and deliver results to customers, much like a doctor provide service to each individual patient with different need.

One company like this is i2 technologies, ITWO.

[GNESS]

Clearly cloud computing won't be for everybody; but it will probably start by serving under-served niches where IT is challenged, reactive or not economical. It could drive new combinations of specialized services as well..
Greg