Google opens an office --- can it beat Microsoft?

Microsoft's Office products generated $11.7 billion in revenue for the fiscal year ended June 30 and nearly $8.3 billion in profit. Now Google wants a piece of the office productivity market.

After reading an article on InformationWeek, it is clear that Google is gunning to become the next Microsoft. Competition is a good thing and it can only benefit consumers of all sizes.

The question is whether Google can make a dent into Microsoft's share. My biggest concern will be around support. What will Google's customer service and tech support model look like? Or will new companies sprout up to "support" the Google suite? Google will add Writely and Calendar support later this year along with a pay model for advanced features and tools.

There are other companies offering online office products. For example Zoho and 37Signals. For the purposes of this report, we will focus on Google only. A future report will tie all of the current offerings together.

This fight looks very similar to a fight between anyone and P&G (Proctor and Gamble). P&G just raises their spending and reduces prices to push out the competition. I can see Microsoft handling these new tools in a similar fashion. Also, I will bet an iPod that Microsoft will acquire several of these online office tool companies.

Let's take a look at a few of the main customer segments within Microsoft's base for their Office suite.

• Schools/Universities
• Small/Medium Businesses
• Large Corporations
• Individuals

Schools/Universities

I can see this group moving to Google first. When I was in grad school (2003-2005), GSU was trying every possible method to cut costs. Since most universities have Internet access in the classrooms and labs, this will make the transition easy.

Small/Medium Businesses

Very much like the group above, these businesses are always trying to reduce costs which helps increase ROI (return on investment). This group will be willing to move as long as Google can show the value of the move. I think they will be OK with the advertising in return for the software.

Large Corporations

This is the customer segment that I do not see moving to Google, at least not in the near-term. At my former employer (75,000+ employees), it was a MS shop. I believe that MS creates most contracts with at least five-year terms. So the net result is that even if Google wants to step into this segment, it will probably take until 2010 before they can begin.

Individuals

I think there are really 2 sets of individuals: those who will and those who won't. Those who will are the individuals who are comfortable with using the Internet fully. For example, my mother will never use Google tools for her office products. Won't happen. Once she is comfortable with an application (i.e. MS Word), she will stick with it as long as possible.

Conclusion

To summarize, I think that a new player in the office suite space is a good thing. Competition will help Microsoft to drive an even better product and eventually both companies will 1-up each other providing an even better quality product. I am looking forward to options in a market which basically has had none for the last 5-7 years. Support and reliability will be the biggest factors to watch as share increases for Google.

Interesting side note - as I was working on this column, an advertisement for Gateway appears on the tube - their big selling pitch, "This laptop comes with Microsoft Office pre-installed". Interesting timing!

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