With Google Apps, It's Game On

With the release of Google Apps Premier Edition, there's little doubt that Google (Nasdaq: GOOG) has its sights set squarely on Microsoft (Nasdaq: MSFT) and the market for office software. Add in the fact that marquee names are on board, including Procter & Gamble for the new software suite, and there's clearly at least some degree of threat behind that challenge.

What remains to be seen are how Microsoft will respond, whether users will adopt Google's offerings in significant enough numbers and how the competitive landscape may unfold over the next few years.

"Today, from a technical perspective, Google Apps does not represent a huge threat to Microsoft," Yankee Group analyst Laura DiDio told TechNewsWorld. "It still needs a lot of window dressing around the applications -- service and support, integration, interoperability, etc. But in two to three years from now? Yes, it could well be. It's going to make Microsoft have to run harder and provide more value."

Not Ready for Prime Time

"I don't think many people will migrate to Google Apps right away," agreed Rob Enderle, president and principal analyst at the Enderle Group. "A big trend in the industry is to go to laptops, and we just don't have reliable wireless broadband to the point where we could live on an online-only environment."

Many users will likely also have trouble trusting Google to host the applications, Enderle told TechNewsWorld. "Google is not the most trusted name for privacy or intellectual property," he added, so ultimately the company will need to offer the option for users to host it themselves, or via a trusted third party.

Nevertheless, "if I were Bill Gates, I'd be very nervous," DiDio said. Google's management team is a formidable combination, and the company is in it for the long haul, she noted. "If anybody can do it, Google can. They have money, momentum and marketing."

"This is a real long-term risk to Microsoft," Enderle suggested. "Google appears to be 'kryptonite' to Microsoft. People believe they can actually do this, and because they have resources, they can keep at it indefinitely."

An Indirect Threat?

The threat Google poses to Microsoft may not even be in the form of direct competition, however, Tom Austin, vice president and research fellow at Gartner (NYSE: IT), told TechNewsWorld. "Google Apps is different from Microsoft Office. It's not going to directly compete with Office -- it's just going to bleed it dry. It will spread virally from user to user, small team to small team, and might be really effective for ad hoc, short term projects."

In other words, it will likely win acceptance primarily for smaller projects, while Office will continue to dominate larger-scale and longer-term uses. Of course, Austin noted, those small projects could accumulate like snowflakes: "After a while, they're 10 feet deep and you're buried."

So instead of competing directly with Office, Google Apps will compete by not competing, so to speak. "We see Google Apps decreasing the amount of time people spend in Office," Austin explained. "They'll still want Office, but not as much. They'll be slower to upgrade, and they'll make it harder for Microsoft to maintain its revenue stream."

Deja Vu

In many ways, what Google is trying to do to Microsoft today is much the same thing that Microsoft did to IBM (NYSE: IBM) 30 years ago, DiDio pointed out. "The difference is that back then, Microsoft was a little-known upstart." Google, on the other hand, is anything but. "The reason Bill Gates fears Google is what he's always said publicly -- he fears the next Bill Gates," DiDio added.

IBM, interestingly, may in fact re-emerge with a new competitive role. The company is positioning itself to re-enter the desktop software market again, according to Enderle, and its presence could reshape the competitive landscape. When that happens, "the real competition may end up being among Google Apps, OpenOffice and whatever IBM brings to the table," he explained.

Customers Will Win

However the competitive lineup plays out, one thing is clear: Customers will benefit. "What I like about this scenario is that now there's competition, and that serves customers," said DiDio.

"I wouldn't count anybody out," Austin concluded. "This is the beginning of a new era of Software as a Service, especially for collaborative applications and e-mail . It's wonderful -- may the best company win."

In other words, DiDio said, "The game is on."