Why Google Matters to Microsoft

Google-Microsoft competition is sure to be a hot commentary topic following today's formal release of Google Apps Premier Edition.

My colleague Steven J. Vaughan-Nichols is one example. He contends that Google is "finally coming after Microsoft Office." I don't completely agree. He's right that Google is a competitive threat, but that doesn't mean the information company actively or even aggressively competes with Microsoft. Google is going about business that just happens to compete with Microsoft.

The obvious conclusion—like the conclusion that the sun revolves around the earth—would be wrong. Google didn't release "Apps" to compete with Microsoft. Google's objective is much bigger than Microsoft: A googol of information.

Dueling platforms
Google and Microsoft are both platform companies. The core Microsoft platform is the operating system, while Google's platform is information. Google is not a search company. Search is a means to an end, and the end is information. Around information, Google wraps search and contextual advertising, which are ways of monetizing information.

Google's initial success was searching information on public Web servers. With Google Desktop and Search Appliance, the informational conquest shifted to the PC and network. Those tools opened up access to content created by the consumer of the information. Wherever information is created and needs to be easily accessed, Google will advance its platform.

Businesses naturally create all kinds of information, for which they need to extend the utility—through features like collaboration—and easily consume it. As such, it's to be expected that Google would develop productivity software and services for creating, sharing and searching content created by the consumer of the information.

Microsoft succeeded in part by good timing. The company caught the crest of the computing wave that shifted information relevance from the mainframe to the PC. Google is riding the crest of another wave, as informational relevance shifts from the desktop to the Web. Lighter clients—whether browser, feeder or widget—can provide access to information anytime, anywhere and on anything.

And the need for "anytime, anywhere, on anything" information increases as more workers go mobile. According to an IDC report released about 18 months ago, the worldwide mobile work force will exceed 850 million in 2009. Which will come first, 7 billion people living on this planet or 1 billion of them working on the go?

My contention: Google is more focused on riding the next computing wave than competing with Microsoft. Wherever there is information, Google wants a part of it. All Google products are oriented towards information—making it easier to sift through and consume. Microsoft increasingly has an informational focus with Office and SharePoint Server, but more about the creation and formatting of the content and extracting value within the confines of its user interfaces and file formats.

Do unto others ...
Google concerns Microsoft executives in part because the information company is in a position to do to Microsoft what it did to many other companies—and perhaps more successfully.

When computing relevance shifted from the mainframe to the PC, Microsoft was the scrappy little dog. Big dog IBM had a huge built-up corporate infrastructure and large customer base. Microsoft had little to lose but much to gain, and the upstart took chances IBM dared not. The possibility of losing massive revenue streams made IBM risk-averse.

Microsoft's success is rooted in two practices: releasing products that were "good enough" and offering free stuff as a way of enhancing the value of its platform. In the early 1990s, when WordPerfect dominated, Microsoft bundled together Word, Excel and PowerPoint and sold "Office" for the same price as the word processor. The approach is most successful when Microsoft's product reaches a "good enough" threshold for most users. The software didn't have to be better; it simply had to offer features most people wanted for a better price.

Microsoft also embarked on an aggressive bundling campaign. The company incorporated valuable technologies into Windows that other software developers had to charge for. Netscape and RealNetworks are two examples. Microsoft could spend hundreds of millions on free software because the objective was to enhance the value and sales of its platforms. The strategy worked best when competitors had established products or revenue streams and Microsoft had little or none.

Google's platform approach is similar to Microsoft's. The information company offers stuff for less, usually free, and reaps money through other means, such as contextual advertising. Google also reaches for that "good enough" threshold. When the product's features meet enough users' needs to use it on the Web, Google makes money through contextual advertising or search keywords.

The risk for Microsoft is real. Google can give away—or in the case of Apps, cheaply sell—stuff Microsoft charges heaps of money for. Roles are reversed. Microsoft is the new IBM—the company with the big, established computing platform, with loads of customers and huge revenue streams at risk. Microsoft has responded slowly to competition from Google, because the company doesn't want to make big changes that could put cash cows Office and Windows in the barn.

Yes, Google competes with Microsoft, but not by directly targeting the company that Bill Gates built. Google's much more worried about its business than Microsoft's.