Google and Long Tail Computing

Earlier today, Google introduced Google Apps Premier Edition, which offers Web-based productivity and collaboration tools for enterprises.

There is opportunity for Google Apps in the enterprise, but not by knocking users off Office. Microsoft's productivity suite is too successful, but not everywhere. It's the "not everywhere" where Google Apps could make inroads.

Microsoft has a huge fragmentation problem, where businesses aren't quickly upgrading to new versions of Office. According to JupiterResearch, in 2006 more medium and large businesses used Office XP than Office 2003. Interestingly, there was no change statistically in Office 95, 97 and 2000 usage in 2006 compared to 2005. Most businesses run multiple Office versions, hence the fragmentation. (Confession: My corporate-issue laptop has Office XP.)

These upgrade laggards form part of a Long Tail of computing that Google could capture as Apps customers. The statistical term Long Tail took on renewed meaning in a 2004 Wired article (and subsequent book) by Wired Editor Chris Anderson. He used the term with respect to commerce. At the head are the popular items, which is actually a small number compared to the vast tail. Operations like Amazon.com can sell to both ends because they don't have physical constraints like display space that compel the stocking of only the most popular items.

With productivity suites—and other software categories, for that matter—I see a Long Tail of users, which is a different application of the term than Anderson used. Companies where Office is an entrenched product form the head, but behind them is a larger number—a Long Tail—of businesses ambivalent about Microsoft's productivity suite.

They are a motley bunch. Their ranks include smaller businesses; satellite offices; mobile workers; organizations where Office long ago achieved a "good enough" threshold; operations where productivity suite benefits don't justify upgrades; businesses such as manufacturing that only need basic productivity functions; and others. If consumers and students are added to the mix, the tail is indeed long.

Microsoft knows the tail is there; otherwise Jeff Raikes, president of Microsoft Business Division, wouldn't continue raising revenue goals. But, so far, Microsoft hasn't done so well at capturing all the potential business from the Long Tail. There are four fundamental reasons:

• Office long ago reached a feature set that was good enough for most customers.
• Microsoft's licensing and sales strategies favor the head—the largest businesses, which are most likely to standardize on Office and stick with it.
• Office is encumbered by baggage for the tail that means something to the head—server-based functions and cross-application integration.
• The server-based and cross-integrated features substantially increase the cost of Office. For example, collaboration features would require Office, SharePoint Server and Windows Server plus their associated CALs (client-access licenses).

There are plenty of Office users in the Long Tail, and there is legitimate question as to why they would move to Google Apps if they wouldn't go to newer versions of Microsoft software. The answer is found in the reasons Microsoft successfully sells the head but not the tail:

• Apps features are good enough, meaning they hit the 80-90 percent of functions most users need most of the time.
• Licensing terms are easy: free for the basic features and $50 a year for the Premier Edition. Robust e-mail is available without the need to purchase Exchange Server, Office and Windows Server. Collaboration is included without the purchase of the aforementioned and SharePoint Server.
• The feature set is streamlined with the basic functions most people need most of time, without the bloat of hooks into other applications or server software.
• Web-based delivery means that features are available anytime, anywhere and on anything.

Office users at the head are encumbered by their infrastructure investment, costs associated with switching and Microsoft volume-licensing contractual commitment. But at the tail-end of the head are users who don't have access to Lotus Notes or SharePoint and would like to collaborate. They are in position to use Office and Google Apps. The greater threat to Microsoft isn't that enterprises would switch from Office but that they would use Google Apps, too. Users further down the tail have fewer encumbrances to switching, or more likely, using Google Apps and Office. (Confession: For a recent corporate project, editors here collaborated using Google Docs and Spreadsheets.)

The browser somewhat foreshadows what could occur with the productivity suite. Firefox's success isn't any market share gain from Internet Explorer. It's based on people who only used Internet Explorer before using Firefox, too. That number could be substantially higher than what's reflected in market share data.

Whether the head or the tail, Google benefits from good timing. By redesigning the Office user interface, Microsoft has created another barrier to switching from old Office suites and increased costs along the way. Businesses will have to budget for work disruption, extra training and increased support calls, if switching to Office 2007. These kinds of costs have long been a barrier to businesses considering switching to competing productivity suites. Now the costs apply to Office, too. Google's interface is loads more familiar because it resembles the older Office motif.

Google Apps has a big problem: storage. Many businesses, even those farther down the Long Tail, may be wary of storing their valuable information on a Google server. Google could solve that problem by offering businesses an option to store the information locally using Mini or Search Appliance.