CXO

Google vs. Microsoft

At the 2008 Gartner Application Development, Integration and Web Services Summit, David Mitchell Smith, vice president and Gartner fellow gave a presentation titled "Google vs. Microsoft", discussing the seeming battle between the two companies.

At the 2008 Gartner Application Development, Integration and Web Services Summit, David Mitchell Smith, vice president and Gartner fellow gave a presentation titled "Google vs. Microsoft", discussing the seeming battle between the two companies.

Smith commenced the presentation with a statement: "Microsoft is currently better-positioned to succeed in advertising than Google is in enterprise software." What this means is that there is an assumption that Microsoft will be more successful in advertising than it is today, but that doesn't necessarily mean more successful than Google. However, Google will not succeed in enterprise software. They will continue to make money, but they won't achieve real success in this area.

This may seem strange considering Writely, only a small company, is now a part of Google and the original creator of Google Docs managed to replicate and possibly improve what Microsoft has spent years developing and investing millions of dollars in. Smith argues that people don't use Google Docs because it is a better word processor, but because of the collaboration component.

Microsoft is now going after the advertising market, because there is big potential there, but this happens to be the core market for Google. In turn, Smith says Google is attempting to divert Microsoft's attention from advertising, by introducing things like Google Docs in order to protect itself.

Microsoft and Google's present position

According to Smith, Microsoft today is a different company to what it was five years ago. Its real strength and main source of revenue is still its traditional tools, such as the operating system and Office, but Microsoft is trying new things. Contrary to popular belief, the company is not as anti-open source as people think. Microsoft opposes open source in its core market, like operating systems, but support it in others — take for instance Moonlight.

Microsoft will continue to put its effort into the Live platform. According to Smith, Microsoft can be characterised by "platform thinking" and they "build things to be extended". The Live platform will accentuate SaaS, but Microsoft's definition of SaaS differs to that of other vendors, as it believes not everything should be in the cloud and wants to leverage the desktop-rich-client market, which it dominates. Microsoft views SaaS as "software plus services" and "server is equal to service", aimed at supporting a mixture of different styles of client, PCs and devices, Web services, client software and peer to peer.

To date Microsoft has been driven by two main forces: technology and competition. It believes in technology enabled by its vision, such as integrated storage and voice recognition. In regards to competition, Smith says, Microsoft is a very paranoid company and they rise well to pressure.

Google on the other hand is in a very different position. Firstly, it has a clear leadership. With Bill Gates gone, Microsoft's position becomes a bit ambiguous. Additionally, Google is a media company with no sales force. Its main source of revenue are small to medium-sized enterprises.

Smith says Google's success can be attributed to the following principles:

|> Feasible business model based on self-service and advertising
|> A good working environment: voted number one place to work in by US Fortune magazine
|> Democratising information: making everything accessible and searchable
|> Doing no evil

In what areas they compete

Both Microsoft and Google compete in each other's main markets. Microsoft is investing in its search portal and advertising, while Google has launched its personal productivity tools, such as Google word processor and spreadsheet, directly competing with Office. In the online world, both face considerable competition from Yahoo.

Google's strong point remains search, where it dominates, but most of its revenue comes from advertising. Microsoft is doing better than Google in email; instant messaging (IM); media, entertainment and social networking sectors. Yahoo on the other hand, is the leader in email; IM; media; entertainment and social networking. This is why Yahoo is so attractive to Microsoft. According to Smith, the deal is not completely dead and may occur in some form, if not acquisition then possibly partnership. Microsoft has made big investments in advertising, but still lacks a big audience, which it was hoping to gain through Yahoo. Smith believes both would be better together than apart. While the bid mainly concentrated on advertising, it would also enable Microsoft to take advantage of Web-based delivery models, like Web platforms and cloud computing.

The two companies compete directly in these areas:

|> SaaS: Both companies are taking advantage of the SaaS model, Google with Google Docs and Google Apps, and Microsoft with its Live platform.
|> Consumerism: Both have a strong identity with consumers. Microsoft is a bit reluctant about leveraging consumerism, as its real success and expertise is in the enterprise market.
|> Web 2.0: Google remains the leader, but not on the social side of things. Some of the services they both offer are blogging and free desktop search software. Microsoft sees both a threat and an opportunity in this area.
|> Open Source: Although Microsoft doesn't support open source in its core markets such as OS, it does in others. Although open source is the essence of Google, it has not entirely embraced the concept.
|> Global Class: Google has more expertise in global systems than any of its competitors, while Microsoft is making huge investments into improving its MSN data centres.

Threats to Microsoft

Probably the most significant threat to Microsoft is AJAX and its ability to create user experience that are becoming just as good as the rich client, according to Smith. This is a direct threat to Microsoft's products such as Office. Google's product is not necessarily better, but people will continue to use it because of the collaboration features and its simplicity. Users don't need complicated and rich features. As demonstrated, only about 20 per cent of features in Word are used on a regular basis.

Another threat is open source along with Linux. Linux poses a threat to Microsoft's server and desktop sectors. Linux has a large community behind it with differing interests, working in a collaborative environment. It makes it challenging for Microsoft to focus on only one vendor or environment.

Threats to Google

In Smith's words "when you are king, people come after you". Vendors are starting to attack Google in the same way they do Microsoft. Google has made enemies with telecommunication companies and information providers, organisations that could have been potential partners.

Although, Google dominates in general search, some areas that could threaten it are social search and video.

Comparing Microsoft Office and Google Apps

Smith believes it is unrealistic to think that Google Apps will replace Microsoft Office any time soon. Google Apps could be thought of as "complementary to Office", although Google fans might think differently.

Microsoft has half a billion users, as opposed to Google with 1.6 million. Most of Microsoft's users are business users, while Google apps users may be business users, but they are acting as individuals.

Microsoft Office has a wide range of components and features, but as mentioned previously most users don't need fancy features. Google keeps expanding Google Apps and adding new collaborative features. It supports new kinds of activities, Microsoft Office cannot. For instance, e-forms in spreadsheets.

According to Smith, Microsoft didn't want to lose out to Google, because of the collaboration component, so it introduced SharePoint. While the product offers some form of collaboration and content sharing, Google's design principles are different. Its applications are networked, real-time, global and can run on any device.

Google Apps and Enterprise Adoption

Google is expanding its product base, by providing different versions of Google Apps. So far there are Premier, Education and Team editions. New features are also being added, such as Presentations, Gears, iMap and Multiple Calendars, wikis and e-forms, while the cost keeps decreasing.

However, Smith says, enterprises still don't trust Google in the same way they didn't trust Microsoft early on. For instance, although a quality product, the word "beta" has still not been taken out of Gmail, making it seem somewhat untrustworthy. Similarly, the Google Apps functionality is incomplete, making it more costly for some organisations. On the other hand, users could gradually learn new features as Google Apps evolves, reducing the cost of training the company would have spent on a big upgrade.

Although the evolution of Web 2.0 has seen users demanding collaborative tools such as that of Google, some companies may be reluctant to switch to cloud-based applications, especially if they have invested in enterprise applications such as that of Microsoft.

This ongoing battle between Google and Microsoft is not likely to end any time soon, nor will anyone emerge as the winner or loser. Microsoft's environment cannot remain homogeneous, as this doesn't resemble the real world. The challenge for Google will be the enterprise market, but its real strength will remain in search and advertising.

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