A Google Package Challenges Microsoft
On Thursday, Google, the Internet search giant, will unveil 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 included programs for e-mail, instant messaging, calendars and Web page creation; the other, called Docs and Spreadsheets, included 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.
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.
“We are in the process of phasing out Microsoft Office and Exchange from our company,” said Marc Benioff, the chief executive of SalesForce.com and a frequent Microsoft critic.
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.
Ms. 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,” Ms. Wettemann said.
Mark R. 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,” Mr. Anderson said. “Google will have to prove itself in terms of security and in terms of quality.”
For its part, Google has at times emphasized the competition with Microsoft and at times played it down.
Mr. 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.”
Mr. 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.