Google Advances Further into Microsoft's Territory

Includes: GOOG, MSFT
by: Carneades

In the midst of the attention and fanfare surrounding Microsoft’s (NASDAQ:MSFT) release of “Bing”, we would like to concentrate on a less publicized trend involving Google’s encroachment into business segments that have traditionally been dominated by Microsoft.

Specifically, we are referring to Microsoft’s business of providing company’s with internal data servers that manage documents and provide email and calendar synchronization. The portion of Microsoft’s revenue, labeled “Servers and Tools”, amounted to $3.469B or 25.4% of the Company’s total revenue for the three months ended on March 31st. Clearly, the server business is an integral component of Microsoft’s overall operation.

Given the importance of server hardware sales and licensing fees to Microsoft, it isn’t surprising that Google (NASDAQ:GOOG) has been quietly developing lower cost alternatives to compete with Microsoft in this arena. Although Microsoft currently dominates the corporate IT server landscape, Google has several immediately apparent advantages.

First, and especially important in a recession, is cost. Google provides visitors to its business solutions website with a simple calculator tool that allows a business to estimate the dollar amount that could be saved annually by switching to Google based servers. The factor that almost ensures a Google victory on every calculation is that the Company includes technical support free of charge with the annual purchase. A major cost associated with corporate servers, as most businesses will attest, is the cost of repairs and maintenance. Google removes that cost from the equation.

Second is the physical space requirement. A purchaser of Microsoft’s product actually takes possession of the physical server equipment, whereas Google’s servers handle all data remotely.

The third primary advantage that we’ve identified is the sheer mobility of Google’s product. Specifically, Google offers the ability to access your business documents from any location, extremely handy in today’s world. Microsoft does offer “Remote Desktop” capabilities, but the process entails a rather inconvenient login through a specific administrative tool that must be installed on your computer.

To be clear, we are not predicting that Google will quickly erode this portion of Microsoft’s business. However, the cost and functionality advantages that Google brings to the table could prove to be a painful thorn in Microsoft’s side. As with the introduction of Google’s free document and spreadsheet programs, the move into business solutions is part of what appears to be a larger strategy designed to suffocate Microsoft’s expansion, and redefine the rules of the Internet.

After briefly sampling Bing, we are doubtful as to its ability to compete with Google. More intriguing, in our opinion, is Google’s upcoming release (expected in July) of connector that will allow for synchronization of GoogleApps and BlackBerry’s Enterprise Server. This release will satisfy one of IT professionals remaining qualms concerning the use of the Google service, and lay the groundwork for additional encroachment into Microsoft controlled territory.

Disclosure: No position in any of the companies mentioned.

About this article:

Want to share your opinion on this article? Add a comment.
Disagree with this article? .
To report a factual error in this article, click here