[Infowarrior] - Google challenges Microsoft with new business package

[Richard Forno]

Google challenges Microsoft with new business package
By Miguel Helft
Published: February 22, 2007

http://www.iht.com/articles/2007/02/22/business/google.php

SAN FRANCISCO: Google is taking aim at one of Microsoft's most lucrative
franchises.

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

The package, called Google Apps, combines two sets of previously available
software bundles. One includes programs for e-mail, instant messaging,
calendars and Web page creation; the other, called Docs and Spreadsheets,
includes 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.

For corporate technology staffs, "we think that will be a very refreshing
change," said Dave Girouard, Google's vice president and general manager for
enterprise.
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The e-mail and messaging package, which is based on products like Gmail,
Google's e-mail service, has been available in a free trial since August and
is supported by advertising. It has been used by thousands of businesses,
educational institutions and other organizations, Google said.

Google will continue to provide the extended bundle of software free to
businesses and educational institutions. But it will also offer businesses
additional e-mail storage and customer support for an annual fee of $50 a
user.

By comparison, businesses pay on average about $225 a person annually for
Office and Exchange, the Microsoft server software typically used for
corporate e-mail systems, in addition to the costs of in-house management,
customer support and hardware, according to the market research firm
Gartner.

Google said initial customers of Google Apps would include a unit of Procter
& Gamble and SalesForce.com, a pioneer in the business of delivering
software as an Internet service.

Google Apps comes at a time of increased competition between Microsoft and
Google in a number of areas, including Internet search and advertising and
mobile services. And it comes just as corporations are considering whether
to upgrade to recently released versions of Microsoft Windows and Office.

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.

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," Wettemann said.

Mark Anderson, an analyst at Strategic News Service, a technology consulting
firm, said Microsoft should worry about Google's inroads into one of its
core businesses but would not see an immediate impact.

"These things take years to happen," Anderson said. "Google will have to
prove itself in terms of security and in terms of quality."

Girouard said Google's products were not replacements for Excel or Word,
which he admits are more powerful. But he added that for smaller businesses
and for certain groups of employees within larger companies, Google Apps
could be a substitute for Microsoft's products.

Microsoft has taken steps to embrace the trend toward Internet services with
products like Office Live, a package of functions to help small businesses
set up Web sites.

"We have a bunch of hosted services that we offer to our customers," said
Chris Capossela, vice president for Office at Microsoft. "Our belief is that
the future of computing is a combination of software and services."

Capossela said he welcomed the competition. But he said he expected that
many customers would continue to want to have their data stored in-house
because of security, legal and compliance reasons.

For now, Google's share of the business software market is a tiny fraction
of Microsoft's.

Google said more than 100,000 small businesses had been using Google Apps
for Your Domain, as the earlier package of e-mail and messaging programs was
known. Docs and Spreadsheets had 432,000 users in December, according to
Nielsen/NetRatings. Microsoft says Office has 450 million to 500 million
users.