Microsoft realizes that the search leader has been on the verge of ripping a big hole in its ocean of customers for business applications; now, by introducing a connector between its Web-based email service and Outlook, Microsoft's email client, Google is about to open a veritable floodgate of business defections.
Google has relied thus far on consumer-driven search for more than 97 percent of its revenues, as my colleague Erik Sherman points out. But while Erik sees Google's new tool as a sign of desperation, I think it's just another piece of a strategy aimed at draining Microsoft of its lifeblood pint by pint and enterprise deal by enterprise deal. But where I think Erik really gets it wrong is his assumption that Google is trying to work its way into the enterprise in order to familiarize workers with its services.
People tend to keep what they're familiar with, and when you are given a certain set of applications in a corporation, those are the ones to which you tend to gravitate in your off hours.It's the other way around, and always has been -- Google is using its powerful brand with individuals to force its way into the office buildings. Progress has been slow, but Ed Laczynski, CTO of Web services and software integrator LTech, told me "the dam is about to break. The trickle of big names is going to turn into a torrent." Laczynski said he's aware of more than 20 Fortune 100 companies in some stage of testing or divisional implementation of Google's applications as replacements for equivalent Microsoft products. Laczynski said that most of these deals occur when Exchange email servers are nearing end-of-life, or enterprise licenses are coming up for renewal.
The main resistance to this change isn't from IT or even rank-and-file employees, Laczynski told me, but rather in the C-level suites, where users are loathe to give up Outlook, which integrates calendar, appointment and contact features with email. The new connector to Outlook will allow software and service integrators like LTech "rip out the back end" while preserving the Outlook client for users who want to keep it. "This should help move the game," Laczynski said.
Of course, Google also has the economy on its side. In ordinary times, most companies would consider email the cost of doing business. And as Laczynski said, for a CIO, the two surefire ways to get fired are to mess up payroll or email. But these aren't ordinary times, and companies are under enormous pressure to cut costs. CIOs "can't not look at Google," Laczynski said. Not only because the cost of Google gmail is between 12 and 20 percent of the cost of Exchange, but also because many enterprises find they can save even more money by switching employees from Office to Google's word processing and spreadsheet applications. Even if not all employees are switched from Office, each $100 seat license adds up to significant cost savings, and using Google docs for collaboration also allows customers to sunset some if not all of their SharePoint server licenses.
Google has been asiduously courting partners like LTech and has given his company much more support than he received from Microsoft, Oracle or IBM, Laczynski said. "Google does a lot with helping us develop a viable business," he added. That's exactly how Microsoft built its application server business in the 1990s, by doing a better job of supporting its channels than competitors like Novell.