Google Wants 90% of Microsoft Office Users

Google believes it can capture 90 percent of Microsoft Office users paying a premium for features they don’t use. The overt goal: a direct assault on Microsoft’s cash generator and potential future business cornerstone, as Windows 8 continues to struggle.

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When people think Google Inc., they think search. That’s changing, as Google is claiming greater success at luring enterprise and midmarket companies to use its Google Apps productivity suite. The increasing sales are emboldening Google to target Microsoft Corp.’s Office productivity software franchise, with the goal of claiming up to 90 percent of its non-power users.

In an interview with AllThingsD, Google's Amit Singh says sales of Google Apps are increasing and Google is competitive with Microsoft in enterprise deals. The momentum is such, he says, that Google will take market share away from Microsoft by attacking users who don’t need all the features and functions embedded in Word, Excel and Outlook.

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“Work the way you live. Consumerization is here. It’s time to embrace it. We’re doubling down on the enterprise. It’s an increasingly important part of Google, and a place where we plan to invest and to support our customers,” says Singh, vice president and head of Google’s enterprise unit.

Google and Microsoft battling over productivity software customers is not new. In the last two years, the companies have waged legal battles over large government contracts. Microsoft has the edge, given its legacy and customer relationships. However, Google has converted several state governments and federal agencies to Google Apps and is claiming to have won several large retailers, including Costco, Kohl’s and Office Depot.

Google recently ended free Google Apps subscriptions for small businesses. The move was made to generate revenue for the platform and open more potential customers for its reseller partners. This is the culmination of years of ratcheting down no-costs service designed to capture market share from Microsoft.

From a channel perspective, Google Apps is the cornerstone of the Google indirect sales program. All government sales go through or with partners, and SMB and enterprise sales are originating with partners. Nearly all migration and customization work is done by partners, as well.

A more aggressive Google targeting the Office cash cow is the last thing Microsoft needs. While a vibrant and solvent company, Microsoft is struggling to recapture momentum and emerge from under the shadow of long-time rival Apple Inc. and upstart-turned-competitor Google. And 2013 was supposed to be Microsoft’s year.

For the last 18 months, Microsoft has telegraphed how it would bolt back to the top of the computing mountain, propelled by Windows 8. But Microsoft didn’t stop there; it virtually refreshed its entire portfolio, including Windows Azure, Windows Server, Lync and Exchange. Windows 8 is the crown jewel, but Office 2013, the Surface tablet and Windows Phone 8 were supposed to be the catalysts for broad adoption.

Things haven’t quite gone Microsoft’s way. Windows 8 sales are sluggish. The market prefers Apple’s iPhone and Google's Android-powered smartphones. Early reports indicate Surface has thus far failed to put a dent in the tablet sales of Apple, Samsung or Amazon. Broader analyst reports indicate PC sales continue to slide and Windows 8 isn’t igniting a buying wave among consumers and businesses.

Another indicator of Microsoft’s precarious predicament is in its most recent earnings report. Windows sales were down 33 percent in the third quarter, while the Office licenses were up. Arguably, Office is already the cash cow for the Redmond, Wash.-based software giant. And there are  indications that someone inside Microsoft recognizes the need to adapt, as rumors circulate of a forthcoming Android version of Office.

Some observers, including Channelnomics, have argued Office -- and not Windows -- is the catalyst for Microsoft’s future success. If the underlying OS is no longer important and the only thing users care about is the application, Office’s familiarity and overwhelming market share could propel Microsoft forward if it’s made available to more non-Windows devices.

Google seems to believe Microsoft will stand firm on its Windows-first philosophy, giving it the opportunity to swoop in and take Office market share. Microsoft’s last-stand defense is functionality, saying that Google doesn’t give users everything they need. Google’s counterargument is users don’t need everything Microsoft gives them, and it’s working to provide the features they do need.

“We know the gaps between our features and theirs. We’re improving them week by week. We’re going to get to the 90 percent,” Singh says.

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