Every so often, The New York Times and others in the mainstream media will cough out some oft-cited article that claims that this year, finally, Google is hitting Microsoft hard where it hurts and taking some chunk of the software giant’s dominant Office business. There’s just one problem: This story is a fantasy, and although anything can change in the future, it always has been.
The latest example is "Google Apps Challenging Microsoft in Business," an article whose title is true only in the strictest, most pedantic sense. Yes, Google makes a product called Google Apps. And yes, Google Apps “competes” with Microsoft (Office), allegedly with businesses, because you now have to pay to use the product. (Google used to offer it for free to individuals and very small businesses.) But the premise of this article -- that Google Apps is actually viable competition for Microsoft’s Office products and services -- is a complete fantasy. Which you can tell simply by reading the article.
Allow me to save you from picking through the facts the paper presents.
In the article, there are no claims about Google seizing some percent of the market for office productivity. Instead, there is purely anecdotal information about “an impressive string of wins” (i.e., companies -- and, more notably, some government agencies -- that have adopted the low-cost but limited Google Apps offering). Indeed, The New York Times cites this cost -- $50 per employee per year -- as a key reason for this apparent success, though of course the periodical also ignores the fact that Google makes no profits from Google Apps: Indeed, one might assume that Microsoft makes more selling mice and other accessories. And as pointed out by a Microsoftie in the article, Google is, in fact, an advertising company and not a supplier of enterprise services. It makes over 96 percent of its revenues from web-based ads.
What bothers me about the article, however, is that is completely glosses over Microsoft’s efforts in cloud-based office productivity. It compares the cost of Google Apps ($50 per user per year) to the traditional, PC-based version of Microsoft Office, which it says costs $400, although “many companies pay half that after negotiating a volume deal.” So not only is Microsoft more expensive, but businesses will need to haggle like they’re buying a new car if they want the best price.
The article does mention Office 365 and alludes to changes in the coming version, but it doesn’t ever mention that this product is the one that does, in fact, compete head-to-head with Google Apps. It also doesn’t mention that Microsoft’s cloud-based Office offerings aren’t just functionally “competitive” with Google Apps but are, in fact, about a hundred times more functional and far more suited to the needs of businesses of all sizes.
Curiously, the article mentions that Office 365 “has not won many converts from Google.” It does not mention, however, the more relevant fact: that Google Apps has not won many converts from the dominant Office lineup from Microsoft, which by the way is now Microsoft’s biggest single business. So although Google Apps no doubt “grew” in 2012 -- it could only have gone up -- and won some converts, so did Microsoft Office. Kind of an inconvenient fact when the point you’re trying to make is that Google is hip and growing while Microsoft is stale and old.
How big is Google Apps? According to the article, “Google [said] in June [that] more than five million businesses were using it, up from four million in late 2011.” The article then quotes an “unnamed former Google executive” who claims that Google Apps revenues were perhaps $1 billion for all of last year. Microsoft’s Office revenues in just the most recent quarter were $5.5 billion, and almost $24 billion for the year. Again, this business is also growing. But what the New York Times focuses on is that most of that revenue comes from “familiar older-style software that depends on computers located within the corporation,” and not on cloud-based services. Which makes sense, because the cloud-based version of Office, called Office 2013, ships broadly at the end of next month. (Office 2013 will be available in traditional versions as well as those that will be delivered like online services as part of Office 365.)
I think the real story here isn’t that Google is trying to compete with Microsoft or vice versa but that Microsoft is doing an impressive job of moving legacy, on-premises solutions to the cloud. Office isn’t just a good example of this, it’s the best example of this, which is a testament to this old-tech company’s ability to keep adapting to the times. Google, meanwhile, continues to make money only by selling ads, which, unless I’m mistaken, is hardly the pedigree that enterprises seek when looking for tech solutions. Heck, maybe that’s a story The New York Times could look into some day as well: It’s pretty clear that Microsoft is adapting better to new business opportunities than Google is.