Google Compete

I feel somewhat vindicated when reading this in CNet this past week as they highlighted the Microsoft effort to drown out Google Docs with their internal Google Compete team.  It was as if I had predicted this whole new threat, that no one at Microsoft seemed to be taking seriously.  I wrote about the threat of Google Docs last October based more on observations in the small business world than anything else.    However it seems as if Google Docs is gaining  traction and causing more and more heads to turn in Redmond. With this weeks announcement of Office 2013 it’s time to revisit this threat, the state of Office as a product, challenges, and the competitive landscape.

Office is king at Microsoft.  The amount of money it generates for the bottom line is enormous and with every release the money seems guaranteed.  If I have one issue with Office it is that by today’s standards it seems dull.   For you business school graduates Office is not just a cash cow.  It’s the purest definition of a cash cow.  Develop it and ship it and you have an instant $10 billion hit.  For those on very old versions all your support will be stopped until you upgrade.  Do not get me wrong, I have used every version since 1.0.  I have become pretty proficient in Powerpoint, Word and Excel.  The productivity increases it has enabled in corporate America should not be undermined.  However like many users I would be surprised if I use  ten percent of its capability.  With each upgrade over the years I found myself very rarely being wowed by new features and capabilities.  When I look back at significant changes many of the big new features are old.  Automatic spell check?  That was over 15 years ago.  True Type fonts?    Did you know you used to have to pay extra for them?  Grammar Checker…old but useful.  I actually did like the ribbon which was much more recent, turns out I am one of the few.  All the other things that got thrown in later such as Publisher, One Note, Access etc..were more than I needed.  I can say on a few occasions I did find Publisher helpful, not enough top say it was worth the additional cost, but a “glad I had it”  application for the time and crisis.

For so long the biggest competition that Microsoft Office has had been itself.  How do I get users to move off of  the previous version to the brand new version with shiny new features.  Most of which go unused and unnoticed.  That has been a big challenge.  But in the enterprise  that was handled by the renewal of large enterprise agreements.  In consumer’s it was through OEM agreements requiring manufacturers to ship the latest and the greatest through new desktops and laptops.  Now there is a whole host of free ware products out in the market such as OpenOffice, LibreOffice, ZoHo and Google Docs, to name a few.  It has taken a whole for these to become visible, but they are starting to come into focus.

Of these the biggest threat is Google Docs.  It is easy to understand why.  Unlike the other names on the list Google has two things.  A focus on this space and second Google has a lot of money on the bank to back this effort.  They were really the first to drive the idea of a cloud based solution for common Office functionality, moving items off of the desktop.  Ray Ozzie, when he was at Microsoft was the first person I saw write about this idea Google created.  The idea being Google using its ad revenues from search to drive software development in other areas.  I don’t think senior leadership paid much attention to Ray.  Not sure why they did not as Ray was a very sharp guy who ranks among the industry legends.  Wit time Google docs has become better.  When I worked at Limelight Networks it  was used by some group, all be it very simply such as lunch order form.  At school my sons teachers use Google Docs (as well as MS Office).  Therefore the kids use Google Docs.  A simple way to post homework (though at our house we had browser issues we had to muddle through).  In the cloud it is easy to access and it is cheap.  One thing I am sure Microsoft will have to deal with which they have not really had to do is drop prices based on competition.

Part of the article highlights that Microsoft has created a Google Compete team.  Not really a big deal.  In 1993 I was at Microsoft and part of the Borland compete team.  Microsoft has always created compete teams to meet whatever the current threat to the business was and I am sure they have had a Google compete team for years.  If I had a dream job it would be working on someone’s compete team in the technology industry.   In the  technology industry where the competition is dynamic and fierce and always evolving to a different space yet to be imagined.  However this compete team differs from previous compete team..remember WordPerfect Office?  Corel Office?  They were competitors in name only.  This time it seems much more real.  Unlike Corel and WordPerfect, Google is not a push over, just ask the Microsoft Bing team.

I have to laugh a bit when I hear Microsoft COO Kevin Turner says he will personally get involved with any customer threatening to move away from Microsoft Office to Google Docs.  As a former Microsoft sales rep I am not sure what I would do in this situation.  Would I:

  • A) Not tell KT and risk losing the business, which would result in me being terminated
  • B) Bring KT in knowing he will slash prices to keep the business, while still expecting me to meet quota (no relief help either) thus causing me to miss my numbers and be terminated – KT would then highlight this as his big win at the Microsoft Sales Conference

I think the real interesting data point will be how many sales calls will he have to make?  If it’s a few then the threat from Google Docs may not be too great.  If it is a lot and beyond his physical capacity to make all the sales calls, then we could start getting a sense of a change in the industry.  Maybe some happy Microsoft field reps as well.

Is this threat real?  Can someone hurt Microsoft in a way it has never been hurt before?  Nothing lasts forever.  With that being said society is changing quickly.  At Starbucks the other day I saw a woman with her laptop open and wondered what was on her desktop.  Surprisingly she had OpenOffice and Opera loaded.  Though I see cloud based office application for the future versus large apps installed on the desktop (OpenOffice is not much different from MS Office).  Microsoft has released Office365 as its cloud based version of Microsoft Office.  However this goes back to a blog I wrote over two-years ago (Microsoft Licensing History and Challenges), how do you transition form a perpetual licensing model to a subscription based service without hurting your bottom line?  When you are talking over $10 billion in revenue, it’s hard to go to Wall Street and say our new subscription model will generate less that amount.  This transformation to the cloud presents Microsoft with one of the biggest challenges in its history, namely because it takes them away from selling what is comfortable.  For Google this transformation is all greenfield opportunity as they have no legacy in the Office productivity suite space.  I can see a future where there will be spots with ad space so I can see what beer I want to drink while I write a whitepaper (maybe while I am writing the whitepaper I shall get that beer, just  a thought, actually a very good thought).  This is a battle that has been a long time coming.  In the end consumers will benefit as will corporate america.  Ultimately with cheaper prices but also better products as competition always fosters innovation, not stagnation.  Microsoft Office needs this.  Rather than giving us new features we need a new paradigm.  The cloud will take us there and at least in the area of traditional office productivity applications I think we all stand to benefit.

Good Night and Good Luck

Hans Henrik Hoffmann July 26, 2012

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