28 February, 2007
By Patricia Pickett

While the new business version of Google Apps may seem like the most obvious rival to Microsoft's Office Live offering, analysts say the two vendors' different business philosophies will affect the way they will move their respective products forward.
The industry was abuzz with the news of Google's launch of Apps Premier Edition, which for US$50 per user account per year will include features such as Google Docs and Spreadsheets, 10GB of storage per user, and 24/7 phone support for critical issues, among other things. This is all on top of what is already offered through the Standard and Education editions of Apps, launched last August. These two free editions include web mail, calendaring, instant messaging and voice-over-IP, and tools for creating web pages.

Office Live, launched last November, would seem to be the best comparison to Apps, since both are delivered through a software-as-a-service (SaaS) model. However, the two vendors' approaches to the world of on-demand software are somewhat different, said Carmi Levy, senior research analyst with Info-Tech Research Group in London, Ont.

"Microsoft Office Live is not as much a dedicated online solution as it is complementary to its existing Office solution, which is an established, lucrative franchise," Levy explained. The Redmond, Wash. software giant is already pulling in billions every year from Office and "can't afford to introduce a product line if there is even a remote suggestion that it will siphon off any revenues from its big cash cow."

The two major areas of focus for Microsoft Office Live are to build on and extend the vendor's existing Office franchise, and to build out its strength in the Web-based space. "Microsoft has a deeper and broader agenda than Google has. If (Microsoft) blows it (with Live), it shoots itself in the foot," Levy said.

Allan Krans, Computer Business Quarterly and Software Business Quarterly analyst with Technology Business Research Inc. of Hampton, N.H., agreed that Microsoft has a balancing act to perform. "They are trying to retain control of the desktop and have a very PC-focused office suite, and they are driving the majority of revenue and profitability off of it. At the same time, they are trying to meet people's needs and desires to access things via the Internet."

Google, on the other hand, has no boxed set of Apps CDs that users can buy at retail stores and load on their computers. It's basically starting from scratch. Therefore, Google "can do anything without worrying about cannibalizing its existing business," Levy said.

Other aspects of Google's business model enable the search giant to launch something without worrying too much about associated risks, said Krans. "Google's business model is that they get all their money from advertising, and they almost see all this other stuff as a testing ground: they invest in something, put it out for free and see what happens," much like what they have done with Google Finance and Google Earth, Krans explained. "If it takes off and they can actually end up making money off of it, that's great. But it's the strength of their advertising that allows them to dabble in other markets."

Google itself is maintaining that Apps Premier is intended to complement rather than compete with other office productivity application vendors. "The idea is not to be exclusive, but to make it as interoperable as possible and make the user experience as seamless as possible," said Kevin Smith, head of enterprise partnerships for Google. Smith added that adoption in some organizations could be very gradual or even partial.

Krans said Google is accurate in saying that Apps will not replace Office overnight. While Apps Premier may light up some competition for Microsoft Office Live, it's not likely that there will be an immediate large impact on Microsoft's Office kingdom. "With the new release of Office 2007, Office will continue to be standard."

Other questions may also curb the switch to Apps Premier, Krans said. Despite the claim that Apps is interoperable with other documents, "I still think that in the minds of a lot of customers, there will be lingering thoughts of, 'Will I have to spend five minutes tweaking each document?'"

The ideal customer for both vendors' offerings would be a smaller or mid-sized business with less stringent productivity needs, or perhaps IT budget constraints or limited maturity of the IT department, said Levy. "They hold huge appeal to organizations that want to get out of the business of maintaining productivity applications." However, if the user needs more sophisticated output -- for example, extensive markup or collaboration features -- the on-demand apps would probably prove insufficient for their needs, he said.

Reprinted by permission of Integrated mar.com (integratedmar.com), EchannelLine © Copyright 2006 Integratedmar.com Corporation.