Office 365 vs. Google Apps: Microsoft Comes Out Firing

One of the big complaints I've had about Microsoft over the past several years is that the once-dominant software giant seems to be pulling its punches these days, and it's rarely, if ever, as aggressive as the company used to be. We've attributed this behavior to various factors, including the grinding antitrust trials of the past decade, a creeping corporate hierarchy that stifles innovation, and the failure of major product initiatives such as Longhorn. But whatever the reason, there's no arguing that today's Microsoft moves more slowly and more tentatively than it did in the past.

Cue Microsoft Senior Director Tom Rizzo, who I'd categorize as a breath of fresh air at a company I was getting seriously worried about.

"I am not going to let a competitor determine the dialog about my product," Rizzo told me during a phone interview last week. "I'm going to uncover the truth. We were a bit of the silent giant before. Now we're not so silent."

Those are fighting words. And while it's perhaps a bit of a stretch to suggest that I actually leapt out of my seat and punched the air with my fist, it happened in spirit. This is the Microsoft I've been missing for these many years.

So what was Rizzo talking about? We met to discuss the competitive landscape in the online services space, which is to say he wanted to compare how Google's offering—Google Apps—stacked up against Microsoft's forthcoming Office 365. As a matter of full disclosure, I've been using Office 365 for months, and as a long-time Gmail (and Google Calendar) user, I had previously evaluated Google Apps and found it—how you say?—lacking. So I was already on board with this line of thinking, frankly, because in my (hopefully non-partisan) mind, Microsoft clearly has the superior solution of the two.

But let's see what Mr. Rizzo has to say about this. After all, I love the approach.

"Google is making a lot of noise these days," Rizzo noted. "But the interesting thing is that Google's bark is worse than its bite. And of those few customers who dropped Microsoft solutions to 'go Google,' many are now coming right back."

As my mind drifted to appropriate sports imagery—Larry Bird hitting one of his patented last second 3 pointers, perhaps—I had to remind myself to keep this down to earth. I mean, let's not get caught up in hyperbole. How bad could it be for Google, really?

"Google Apps has made absolutely no dent in the market at all," Rizzo claimed. "They are failing. If I had to give them a grade, it would be an F. They're just throwing darts at the wall."

So while Rizzo makes up, and then some, for almost a decade of quiet acceptance at the software giant, and I try to wipe this crazy grin off my face, let's consider some numbers. And there are a lot of numbers.

30 million. Google claims that it has 30 million users. But it also noted that these users were spread out between 3 million businesses, schools, and governmental agencies. This means that, on average, there are 10 users per deployment. "These guys are just dipping their toes in the Google water," Rizzo said. "And more often than not, they come back to Microsoft because Google doesn't meet their IT requirements, whether it's a small business or an enterprise. And Google promised it would 'kill Office,' but its [online apps] don't have functionality; this isn't coming to fruition."

9 out of 10. Furthermore, Rizzo says that a survey of Google Apps customers revealed that fully 9 out of 10 were also Microsoft Office users. This means that these customers are not abandoning Office as Google had hoped. "These guys aren't replacing Office," Rizzo said. "They're just trialing Google."

<1 percent. According to a late 2010 Gartner survey, less than one percent of enterprise users were using Google Apps. And that's after 4 years in the market. "These customers trust Microsoft," Rizzo noted. "We provide privacy, security, manageability, and a financially-backed SLA. Google is an ad company. They shoehorn consumer stuff into the commercial space and do not understand the needs of commercial users."

10. When Google came to market with Google Apps, it offered both free and paid versions. But the numbers of users it allowed into the free version has dropped precipitously over the years, going from 250 to 100 to 50 and now to just 10, Rizzo said. (Microsoft doesn't offer a free version of Office 365; its small business version supports up to 25 users.) So why the retreat on the free version of Google Apps? "Google is not making money in this space," Rizzo said.

$5 vs. $6. "Google just raised prices [on the paid version of Google Apps] to $5 per user per month," Rizzo said. This compares to $6 per user per month for the small business version of Office 365, or a $1 difference. "So for the price of one cup of coffee at Starbucks, the additional value here is astronomical," Rizzo said. "There are no ads in Office 365, whereas Google makes the customer the product by putting ads in there. We earn your trust, we respect your privacy, and you pay us to run a valued service."

97 percent. Google makes 97 percent of its revenues from web ads, Rizzo said. It's an ad company. And when you look at the remaining 3 percent, which includes Google Apps, it has declined 23 percent year over year. "Google is under a lot of pressure to make it a viable product," Rizzo said. "They are feeling the pressure."

Just in case you thought the gloves finally came off at this point, Rizzo also mentioned a few of Google's many privacy invasions—the FCC Buzz investigation, its many Street View battles, and a bizarre case in which Google "collected social security numbers from children"—but I think the point had been made. And I like what I'm hearing here because, yes, Microsoft does have the superior product. Yes, I do feel that Microsoft has the offering that businesses are really looking for. And yes—and this is perhaps the most important point here—I do feel that businesses do (and should) trust Microsoft more than Google. Say what you will about these respective companies, but Microsoft gets businesses and their needs and requirements in ways that Google does not.

"Look, we've been in the enterprise business for a long time," Rizzo told me. "We're moving it all forward to the cloud, providing familiar technologies. Exchange admins know how Office 365 works, for them it's just the next evolution of IT. And now they can do less knob turning and add value to their own businesses."

Plain spoken, fiery, and backed with facts. I missed you, Microsoft. Welcome back.

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