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February 22, 2007

Google goes for Microsoft’s throat

Posted by David Hunter at 9:23 AM ET.

After months of speculation, Google is expected to announce today that they have rolled up their collection of Web office suite applications and are offering the package as a hosted service to businesses:

Having won over millions of consumers with its online search and productivity tools, Google is now looking to displace Microsoft as the desktop application provider of choice in corporate America by offering a range of low-cost, zero maintenance software that office workers can access through the Internet.

Google Apps Premier Edition, to be unveiled Thursday, features online e-mail, calendaring, messaging and talk applications as well as a word processor and a spreadsheet. The launch follows Google’s introduction of a similar suite aimed at consumers last August. The new Premier Edition, however, offers enhancements aimed squarely at corporate environments.

Specifically, Google Apps Premier Edition features application programming interfaces that businesses can use to integrate it with their own applications. Ten Gigabytes (10GB) of storage for ad-free Gmail is offered standard, meaning workers can spend more time working and less time cleaning out their in-boxes. And Google is offering service level agreements that promise 99.9% uptime and 24×7 tech support.

But possibly the most compelling aspect of Google Apps — at least from the standpoint of potential customers considering a switch from Microsoft products — is the price. Google is offering the whole package for just $50 per user, per year. Microsoft does not publish volume licensing prices for the Enterprise Edition of Office 2007, its latest entry in the office productivity market. The price of a standalone copy of the Professional Edition is $499.

This was anticipated ever since Google took the first steps in that direction last year, but as might be expected when one of Microsoft’s leading cash cows is threatened, the pundits are out in force. To net out a lot of the commentary (and my observations from the past), online offerings in general and Google’s in particular are not as full featured as Microsoft Office but may just be “good enough” for many users and also have the advantage of simplified file sharing. Google also currently lacks a presentation package to match Microsoft’s PowerPoint.

Some perspective from Adam Lashinsky at Fortune:

Google’s tiny enterprise group already has been marketing a free version of the package to small businesses, and it claims 100,000 users. What’s new is an expanded version for $50 per account per year that includes telephone support and 10 gigabytes of storage capacity, compared with the 2 gigabytes that come for free with a Gmail web-based e-mail program.

Though Google is targeting small businesses – the kind whose IT departments don’t manage giant e-mail systems – it has signed up General Electric and Procter & Gamble for small trials.

Google’s enterprise ambitions are modest. It’s unlikely to dislodge more than a fraction of the 450 million users of Office. Even a rousing success would barely move the needle for Google. If all 100,000 of its current users signed up, for example, it’d mean an additional $5 million in annual revenue.

Still, that Google even cares to try to sell a product against Microsoft in its core area of expertise speaks to Google’s ambitions – as well as its yearning for revenue streams that go beyond advertising. According to Dave Girouard, the vice president for Google’s enterprise group, the productivity package will be profitable at $50 a year. Many corporations pay about $600 a year for employee e-mail, he says, and half the employees in the U.S. don’t even have an e-mail account.

None of that is any reason not to try, of course. When Google dramatically increased the storage capacity of Gmail its competitors were forced to follow suit. Whether or not its new package is successful, this could force a dramatic cost reduction in the expense of corporate e-mail programs.

And I’d add “reduction in the expense of corporate office suites in general,” which in the short term may be the biggest effect on Microsoft.

Update: It’s now been formally announced – Google Introduces New Business Version of Popular Hosted Applications.

Filed under Coopetition, General Business, Google, Microsoft, Microsoft Works, Office, Office 2003, Office 2007, Online Services

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One Response to “Google goes for Microsoft’s throat”

  1. Microsoft Works 9 to be free, ad-supported -- Microsoft News Tracker Says:

    [...] If you aren’t familiar with Microsoft Works, it’s a “lite” office application suite generally bundled on new PCs from OEMs who sign up for it and  it is also available at retail. Works famously isn’t particularly profitable, perhaps because it unfairly gets lumped in with all the “craplets”  that comes bundled on new PCs. However, there have been rumblings that Works might form the basis for a new Web-based office suite that would compete with Google and the other Web office application offerings. [...]

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