Failed Microhoo Deal Primes Google for Enterprise

The failure of Microsoft to acquire Yahoo could echo in the future of the enterprise market with Google emerging as the lead horse in the race, according to one analyst.

Interarbor Solutions analyst Dana Gardner said Microsoft's abandoning of its pursuit for Yahoo will not only keep Google in the lead of online search and advertising markets, but could have an impact on the future of the enterprise market.

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 Google is a relatively small player in the enterprise, selling search appliances to businesses and a collaboration suite that its hosts on its own servers as part of its cloud-based Internet services strategy. All told, these are believed to constitute only 2 percent of the company's revenue.

But as the computing landscape shifts increasingly toward cloud computing, Gardner said, Microsoft's traditional client/server and packaged software model will be threatened. Businesses are already looking to use applications that Google hosts in its own data centers. Microsoft wants to get to the same place and needs Yahoo to help do it.

"There's a great deal of consensus that the older approach of a client/server-based architecture is cost-inefficient," Gardner told eWEEK, adding that the cost of maintaining a PC in many enterprises is more than $1,000 a month.

Moreover, Microsoft's laborious Windows Vista operating system rollout hasn't assuaged any of these pains, meaning businesses will look at alternatives such as cloud-based computing or SAAS (software as a service).

In effect, if a company like Google lets customers use apps for $12 per user a month, more businesses will be compelled to look at the cloud, Gardner said. Microsoft, which broke off its bid for Yahoo on May 3, is in excellent position to do that given its value chain of partners and suppliers, segueing from its on-premises assets to more service-based offerings.

"This will come down to a competition of cost," Gardner said. "Microsoft is at a disadvantage because it's transitioning from a previous high-margin, on-premises software business to a more low-margin, high-volume cloud-based business. They're already at disadvantage economically because they're killing one cash cow to create a cash goat. Google doesn't have to kill anything because its ad-based revenues are all cloud-based already."