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The Google-Microsoft axis

August 28, 2006

There is no love lost between Google and Microsoft. The antipathy of Google's founders toward the Colossus of Redmond is embedded in the very identity of their young company. Google is, by design, the anti-Microsoft; the company's rallying cry - "don't be evil" - is aimed implicitly at its northern neighbor. It's fair to assume that Google would enjoy nothing more than toppling the house that Gates built.

But business, like politics, makes strange bedfellows, and the relationship between Google and Microsoft is beginning to look as symbiotic as it is competitive. Today's introduction of the cumbersomely named Google Apps for Your Domain, an expansion of the private domain Gmail service announced last February, would seem on the face of it to be the beginning of a frontal attack on Microsoft's Office franchise. But the combination of calendar, email and web publishing applications is actually being positioned as a complement to Office, just as Google Spreadsheets was introduced as a complement to Excel. "The right way to view Writely and Google Spreadsheets, especially in the context of a larger business, isn't necessarily as a replacement for Word or Excel," a Google executive told Information Week. "They're the collaboration component of that." Speaking specifically of Google Apps for Your Domain, Dave Girouard, who heads Google's enterprise unit, underscored to Reuters "that the Google Apps platform is not designed to replace Microsoft's core software ... 'We are not really out there to eliminate any applications. We are looking to introduce new ways to solve problems people have been having for years.'"

Even granting the disingenuousness of such comments, they contain a great deal of truth. Google has, wisely, designed its products to extend the capabilities of Microsoft software rather than replace that software. Google may wish, for instance, that Microsoft file formats didn't dominate the business desktop, but it's willing to exist in a world defined by Microsoft products. Google is competing with Microsoft's nascent Live services more than it's competing with Microsoft's existing office suite.

The competition will raise challenges for both companies, posing a particular threat to Microsoft's traditional and very lucrative software-pricing structure. But the biggest threat is to neither Google nor Microsoft but to every other company hoping to get a foothold in the broad market for personal productivity applications. The combined might of the two companies, with their vast user bases and their billions of dollars in annual investments in infrastructure, should put a chill, and probably a fatal one, into any other company looking to enter this market. Entrepreneurs and their investors, in particular, will not be eager to battle the de facto Google-Microsoft axis.

Right now, it appears that the long-time monopoly in office applications may not be dismantled but rather replaced by a duopoly, and that the expected wave of innovation in web-based productivity applications may die long before it reaches shore.

Comments

Google was clever enough with the spreadsheet application in Google Accounts. This, in my opinion, will lead to a different kind of war between the two. A silent one with consequences, as you said, on the others.

Posted by: brenda at August 28, 2006 12:22 PM

Sorry, Nick, I thoroughly disagree with your remark about the nefarious effects of the Google-Microsoft axis on the small software companies willing to enter personal productivity market.

These companies used to exist, but have all been killed a long time ago.

Were it not for Google, no innovation would have happened there for another twenty years.

Posted by: Gianni at August 28, 2006 12:33 PM

You're right about entrepreneurs shying away from offering office apps - but they should. At this point a word processor, spreadsheet program, or even simple database program should be the equivalent of a calculator app a decade ago: absoultely free, widely avaliable, and completely inconsequential.

The big deal for google is the advertising angle, the big deal for Microsoft is the loss of a significant revenue stream. The big deal for web entrepreneurs/programmers is that they should be trying something other than a re-invention of stale old apps.

good news all around

Posted by: cmb [TypeKey Profile Page] at August 28, 2006 12:36 PM

Gianni,

I was referring to the emerging market for online productivity apps, not to the market for desktop productivity apps (which, as you note, has had little competition despite its breadth in terms of products).

Nick

Posted by: Nick Carr at August 28, 2006 01:28 PM

I think that Google is ultimately making MS Office products un-needed. As you can open MS Word/Excel documents in HTML format (they've taken away MS's locked file format advantage) - and given anyone the chance to collaborate. Google wants to exist in a world where MS, or MS's-killer exists. Format neutrality.

Posted by: JohnO at August 28, 2006 02:39 PM

While people see Google as "clever" in reality it is surfing a very slippery slope. Its "key employees" desperately need to keep a high stock PE as its growth rate rapidly declines to 20%/yr in face of competition. The long term revenue growth rates are called into question by the recent click-fraud and arm-twisting (auctions) need to keep keyword-bid rates high. It search really does NOT have a core franchise value - clearly others are gunning for it. However its gmail, orkut and now web-apps DO SUPPLEMENT and provide greater lockin power. That is simply what it is trying to do - embrace and extend so it can concretize its hold on current search audience. --- myindiafamily.com

Posted by: Phillip Jain [TypeKey Profile Page] at August 28, 2006 03:40 PM

"Don't be evil?" I have to agree with Phillip that Google's insistance they aren't competing with Office looks like a simple repeat of Micrsoft's well worn "embrace and conquer" strategy.

Meanwhile, Google's core search and advertising applications seem to slip in usefulness every day. Can I be the only one who notices the ever increasing number of links in my search results that have nothing to do with my topic? Can I be the only advertiser who notices that the bulk of my impressions and clicks are from syndication and not from searches?

Posted by: barmijo [TypeKey Profile Page] at August 28, 2006 04:02 PM

This fight could be a great thing for startups in the personal productivity space as both Google and Microsoft will be interested in acquisitions that either help them gain ground directly or deprive their competitor of an easy way to gain ground.

Or perhaps I should say that this fight could be a great thing for investors in those startups, and for founders who can handle seeing their personal vision sacrified to the strategy of their acquirer.

Posted by: eas at August 28, 2006 04:25 PM

Hi Nick,

I'm not sure I am completely with you on this one; although your arguments (as usual) are valid. I think that Google's strategy is to appear that it is not competing with Microsoft, while at the same time preparing its user-base for a shift. If you recall Microsoft did the same thing with IBM back in the 80's. They did not try and fight the beast (yet) they joined forces and embraced it before they slowly chewed them up and spit them out (in the OS world). I think Google foresees a new universal computing age and is currently positioning themselves to dominate that new age; as Microsoft did back in the 90's. Google will do to Microsoft in the office productivity realm what Microsoft did to IBM in the OS realm.

Posted by: Eric Bernhard at August 28, 2006 06:53 PM

Nick, you better tell this group of entreprenuers getting ready to present at the Office 2.0 conference they are wasting their time against Google and MS. Not sure they would agree...

http://www.office20con.com/

Posted by: vinnie mirchandani [TypeKey Profile Page] at August 28, 2006 07:15 PM

Eric, I generally agree with your analysis of Google's strategy, but I see a lot of differences between the shift to web-based software and the shift to PCs. So I'm not sure history will repeat itself.

Vinnie, I already told them. In fact, I hear they're cancelling the conference as a result of my post.

Posted by: Nick Carr at August 28, 2006 09:17 PM

I'm with Eric on this one. It's a ploy to mislead that I don't think is convincing anyone at MS.

Posted by: Kingsley Joseph at August 28, 2006 11:18 PM

The organizer of the Office 2.0 conference is a friend - the sponsorship, speaker and attendee list is growing amazingly based on updates I see every day. You should register before it sells out...buy you a drink if you go. Google will be there...

Posted by: vinnie mirchandani at August 29, 2006 12:15 AM

As usual, a very interesting perspective. But I feel we have been living in a productivity software world defined by a behemoth company for quite some time now. With a move from Google, this can only help smaller companies enter the arena. In the same way that Google Maps has created thousands of individualized mashups, and the iPod has created hundreds of smaller companies that offer their own iPod gear, this shift in the marketplace opened up opportunities that didn't exist last week.

Posted by: Dan Blank at August 29, 2006 05:11 AM

I have to disagree with JohnO remark that availability of a HTML-format establishes "format neutrality" or even less a level plaing field.

In order to reach format neutrality and a level playing field the format af say a speadsheet needs to contain information about what type of operations have been performed on which data in order to reach the value of a given cell. Mind you they don't have to give me the formula, just standardized information on what operations have been performed.
If you don't have that you only have "dead" data of limited value.

Posted by: Søren Mortensen at August 29, 2006 07:53 AM

Nick --

One chink in your thesis, concerning the limited threat to the MS franchise: we're taking their document file formats away.

Shane Peterson | GovTech

You are not alone, if you are among the many who feel that Microsoft will find a way to stall the assault on their document formats.

It's a safe place to be, for the unimaginative.

Posted by: Sam Hiser [TypeKey Profile Page] at August 29, 2006 08:37 AM

This caught my eye. 'We are not really out there to eliminate any applications. We are looking to introduce new ways to solve problems people have been having for years.'"

It sounds like a classic solution in search of a problem. What are those problems? This seems like what Sun Microsystems has been doing for years. Face it, you don't have any privacy and the way things are going you won't have any problems soon. The downside is that you'll be dead. This will continue to be a problem. People have been having IT for years. People living and competition, such is life. Bite the Big Apple!

Posted by: Jim Dermitt at August 30, 2006 09:58 AM

Could it be that Google is also trying to avoid a fight with the FOSS community and OpenOffice.org?
Google has tried so far to play nice with FOSS (summer of code).

Posted by: Gil Freund [TypeKey Profile Page] at August 30, 2006 10:11 AM

Google isn't worried about a fight. It's the freaking jolly green giant. They are gearing up for Third Generation Internet or 3GI. Instead of taking on Microsoft, 3GI will allow Google to create plug-ins for everything. Have a winery going down the tubes? No problem, with 3GI turn that sour wine into vinegar sales with Google Office with AdWords. Space program getting a bit stale? Google Office for 3GI will offer ad plug-ins to monetize those eyeballs for the next big launch thing. Nothing is final on the final frontier, it's just new that is why the final frontier is the new frontier and with Google it's the new new frontier. Pass the popcorn. Too few in the pews? Google Church will offer a plug-in for Sunday morning collection processing via the 3GI. Praise the Lord and pass the plug-ins. Good God in heaven, holy Mary mother of our savior, Google 3GI could make an honest agency out of the sinners at the NSA, so Thank God It's Google. Music sales down, band suck? With 3GI and Google office for Myspace, it's not a problem. The Google 3GI lyrics plug-in can get you sounding better than old Blue Eyes, with the advanced tone enhancer plug-in you can be swooning and crooning with the best of 'em, dead or alive. All you need is to lose your mind and with 3GI and Google, you won't need Microsoft for that. Good luck and TGIF soon!

Posted by: Jim Dermitt at August 30, 2006 11:17 AM

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