Google Boosts Cloud Computing Apps -- Should Microsoft Worry?

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When Google released 16 new business apps in the Apps Marketplace earlier this month, the move bolstered Google’s claim that it now provides a viable alternative to Office.

Not to be outdone, Microsoft released a Web-based version of Office a week later, indicating that it too is serious about the cloud.

Then came word that Google and Dell were working on a deal to put the forthcoming Chrome OS on Dell PCs.

Since the reviews of Web-based Office are tepid at best, many industry watchers have interpreted all of this as “advantage Google.” Even so, it’s important to remember that Office is, according to IDC, entrenched in up to 97% of all businesses. Meanwhile, Microsoft reports that it sells more than 600,000 Windows 7 licenses each and every day. This translates into 7 copies sold every second of every day since Windows 7 launched. Most of those copies of Windows 7 will be running some version of Office.

Nevertheless, as the enterprise moves slowly but steadily toward cloud computing, Google is the tech behemoth with cloud pedigree, while Microsoft is playing catch-up. Sure, Microsoft has been talking about the cloud for years, much in the way that it touted Web tablets a decade ago. But what happened with tablets? Microsoft flopped and had to grit its teeth as the iPad stole its thunder.

Could the same scenario play out in the cloud?

Microsoft on Every Desktop, but so Is Google
Who’s Making the Cloud Computing Shift?
Not Everyone Goes Google
Smartphones and the Cloud Converge to Favor Google?
RELATED NEWS AND ANALYSIS

Microsoft on Every Desktop, but so Is Google

When I spoke to Michael E. Dortch, Director of Research for FOCUS, an IT market research firm, he cautioned that Microsoft’s track record makes it a pretty safe bet to be a major player in the cloud.

With many past innovations, such as the browser, Microsoft was late to market, but ended up dominating. The big difference this time around, though, is the level of the competition. When Microsoft wrestled the browser away from Netscape, it prevailed against an upstart with no proven revenue model.

In contrast, Google achieved a net income of $6.5 billion for FY 2009.

“Remember, though, Microsoft is on each and every desktop,” Dortch said. When I pointed out that Google is too, Dortch noted a key distinction: “Everyone uses Google, but few in IT actually buy from them. Google is as unknown an entity to IT, as a business partner, as Microsoft is as a cloud provider.”

Who’s Making the Cloud Computing Shift?

Several marquee customers have made the switch to Google Apps, including the City of Los Angeles, biotech firm Genentech and consumer electronics giant Motorola.

In fact, Google claims more than 25 million business users for Google Apps, all of whom have adopted Google Apps in the last three years. That’s some serious momentum.

While some organizations have done forklift migrations to Google, what is more common is for companies to get their feet wet with Google without abandoning Microsoft altogether.

Lincoln Property Company, one of the nation’s largest property development and management firms, actually converted to Google not from Microsoft but from Novell GroupWise. As they were investigating alternatives to GroupWise, the professional services firm they were working with, Cloud Sherpas, recommended Google Apps. Cloud Sherpas has helped almost 2,000 organizations migrate to Google Apps and away from Exchange, GroupWise and Lotus Notes.

“Our email archive was getting so big that it was difficult to back up,” said Jay Kenney, CIO for Lincoln Property. “Our SAN was outdated, and it came down to buying new hardware and most likely embarking on a virtualization effort, which would require significant upfront spending. Or we could move to the cloud.”

Lincoln Property chose the cloud. “By outsourcing email, we’ve freed several servers, avoided the headache of virtualizing our infrastructure and saved a lot of money in the process,” Kenney said.

Now, they use Google Postini for email archives, while also taking advantage of Gmail, Calendar and Docs for collaboration. In fact, many organizations are adopting Google for one thing and one thing only: collaboration.

Lincoln Property still relies on Office, but in order to make Office collaborative, they turn to Google. While Microsoft is beefing up the collaboration features in Office, not everyone is ready to upgrade – and they don’t have to. Google already delivers cheap collaboration without having to abandon legacy Office suites.

In these days of dwindling IT budgets, Rajen Sheth, group product manager for Google Apps, points to another reason to abandon expensive on-premise apps.

“IT is becoming more and more difficult to maintain,” Sheth said. “Businesses spend so much time and money on management and maintenance that they lose sight of their core businesses.”

In fact, Dortch of FOCUS points to maintenance as one of Microsoft’s disadvantages, but not in the way you’re probably thinking. “When you grow to be as big as Microsoft, you lose some of your ability to innovate. Instead, you must spend a lot of time supporting, maintaining and upgrading the things that make you money,” he said.

“One of the smartest technology quotes I ever heard came from Bill Joy, one of the founders of Sun. He said ‘innovation happens elsewhere.’ The problem companies like Microsoft have is that they’re so big that they stop paying attention to those elsewheres, forced instead to focus inwards,” Dortch said.

Thus, instead of being an early mover in the cloud, Microsoft had to spend its time and resources maintaining and updating Office, Windows and a slew of other existing applications. Of course, this doesn’t mean you can count them out when it comes to new technologies.

First-movers are rarely the winners in the tech innovation game, but when the competition comes from other deep-pocketed companies like Google, it could put Microsoft at a disadvantage.

(Microsoft did not respond to requests for an interview in time to get their point of view into this story.)

Another anchor weighing down Microsoft is its outdated licensing model. Businesses are tired of being locked into the expensive, shrink-wrap, per-CPU licensing model.

“There’s a lot of pent up hope in the enterprise that new software purchasing – or renting – models will arise. Google is considered an instrument of change,” Dortch said.

And it’s not just Google. Salesforce.com’s AppExchange, Apple’s App Store, and, yes, Google’s App Marketplace all provide function-specific apps and add-ons that are not only easy to pay for, but also easy to dump if you don’t like them.

Not Everyone Goes Google

Despite all of the gloom and doom in the press about Microsoft’s future, the fact remains that Microsoft owns the desktop, owns productivity and has a long established relationship with the enterprise.

In fact, many analysts believe that Google’s success will come with SMBs that aren’t locked into the Microsoft world. That may be true, but plenty of newer companies are deciding to hitch their wagons to Microsoft.

Leaf.ly, a company founded a few short weeks ago, looked at Google, Amazon and Microsoft and decided to go with Microsoft. Leaf.ly has sets its sites on being the Yelp of medical marijuana, and you would think that a progressive company like Leaf.ly would be hesitant to embrace a status-quo provider.

But that is exactly what Leaf.ly did. They selected Windows Azure and a cloud-based version of SQL to host and manage their website.

“Google is appealing cost-wise, but we saw benchmarks that show it choking at very large scale,” Scott Vickers, co-founder and engineer with Leaf.ly. For a brand new company, that’s a pretty optimistic reason to choose Microsoft. More importantly, though, Microsoft had launched a program that appeals to startups like Leaf.ly.

Leaf.ly was accepted into Microsoft’s BizSpark program, a program that drives down costs and delivers other benefits like community support and access to software they probably couldn’t afford otherwise.

BizSpark is just one of Microsoft’s efforts to push back against challengers like Google. The fact that startups like Leaf.ly are being won over by such programs shows that it would be foolish think Microsoft isn’t a strong contender.

Smartphones and the Cloud Converge to Favor Google?

One final thing to consider as the battle for the cloud rages on is the smartphone. The convergence of cloud computing and the smartphone will radically change how apps are developed, delivered and consumed.

Here Google has an even bigger advantage over Microsoft than in the cloud. While Windows Mobile has been confined to a small corner of the market, Android has been threatening the likes of Apple and BlackBerry.

“Smartphones are a major part of the story,” Sheth of Google said. “But it’s not just smartphones, but other post-PC devices, such as netbooks and tablets. What’s the least common denominator for all of these devices? The browser.”

While Explorer may be the browser of choice for most people, well ahead of Chrome, Google’s worldview is predicated on the browser. And Google believes, to update an old saying, that all browsers lead to Google.