Microsoft, Google Business-Cloud Battle Getting Vicious

Microsoft and Google's battle for business-cloud clients has become particularly vicious, but analysts' numbers suggest the two sides' market share is at a near-draw.

For more than a year, Microsoft has been pushing an aggressive "all in" cloud strategy. The reason behind it is simple: Although desktop-bound software such as Windows and Office continues to dump tons of cash at the company's front door, a paradigm shift is underway-one that threatens to leave Microsoft behind as consumers and businesses embrace the cloud for everything from music streaming to email and productivity applications.

Businesses embracing the cloud expect the new subscription-based model to save them the money and headaches associated with maintaining (and upgrading) on-premises servers and IT infrastructure. That subscription model also ensures Microsoft a steady stream of revenue month over month. For example, Office 365-a rebranding of the company's BPOS platform, now in public beta-unifies Microsoft Office, SharePoint Online, Exchange Online and Lync Online onto a cloud platform available for a set monthly fee per user.

But there's also one very large obstacle standing in the way of Microsoft's path to the cloud: Google, which has devoted enormous resources to developing and deploying its own cloud-based offerings for small and midsize businesses, and the enterprise.

Over the past few months, the animosity between the two companies has escalated to ever-greater heights (or sunk to a deeper nadir, depending on your point of view). Last October, Microsoft announced a partnership with New York City's government to provide municipal employees with access to cloud-based Microsoft applications, in what many saw as a response to Google's agreement with the city of Los Angeles to provide cloud services to its employees. On May 18, Microsoft announced that the city and county of San Francisco had signed a contract to port 23,000 municipal employees' email to its cloud.

The competition between the two companies has become so intense that Google even sued the federal government after the Department of the Interior allegedly denied its bid to update an email and messaging system-a $59 million, five-year contract that had gone to Microsoft's BPOS-Federal suite.

Tom Rizzo, senior director of Microsoft Online Services, insisted in a May 17 interview with eWEEK that businesses were trying Google's business-cloud offerings and then shifting back into Microsoft's camp. The interoperability of his company's cloud offerings with its traditional software, he insisted, had helped Microsoft maintain momentum as it shifted into the cloud. While he didn't cite any data for the number of companies supposedly shifting to Microsoft from Google, he did call out supposed "wins" in that category such as the city of Winston-Salem, which did not return eWEEK's independent request for comment.

Google executives speaking on background to eWEEK took strident exception to Microsoft's assertions.

It's worth taking a look at some analysts' numbers. Traditional desktop-bound Office certainly dominates the vast majority of business environments. Near the end of 2010, research firm Gartner asked some 204 IT pros about their businesses' productivity software, then used that data in a research note that estimated, in part, the Office install base. Office 2003 and 2007 dominated that list, with a respective 33 percent and 41 percent share, while Office 2010 followed behind with 24 percent.

"The survey was taken at the Gartner Symposium in October, so respondents are not representative of smaller organizations, where we believe Google Apps is more popular," Gartner analyst Michael Silver told eWEEK May 18. "Less than 1 percent are using Google Docs now and about 2 percent will be using it by [year-end 2011]. Moreover, most organizations are still using it in addition to Office and not to replace all their Microsoft Office licenses."

A significant percentage of organizations, he added, find an alternative to Office insufficient for their needs, and require supporting a mix of productivity products if they choose something other than Microsoft's offerings: "Most organizations have not had to manage a mix for 15 to 20 years. Supporting a single product for everyone is a luxury most IT managers are used to and like."

But matching cloud-hosted services against their on-premises brethren, as Google likes to point out, can be construed as a case of apples-versus-oranges: an imperfect comparison, to say the least. "Comparing Google to legacy on-premises software makes no sense," Andrew Kovacs, a Google spokesperson, wrote in an email to eWEEK. "It's like questioning Microsoft's market share in mainframe computers." He also claimed that Google is "the leading choice of businesses for cloud email and collaboration, which is where the market is headed."

But studies offering a head-to-head match-up of cloud services are few and far between. Of those reports and surveys, virtually all involve relatively small respondent pools, making it difficult to paint a comprehensive picture of cloud-services penetration within the enterprise, and small and midsize businesses. Both Google and Microsoft refuse to share their respective adoption rates for cloud services, aside from the usual platitudes about having a healthy mix of large and tiny clients.

Nonetheless, some data exists. In the fourth quarter of 2010, Forrester asked a small selection of business IT administrators about their primary hosted-email provider. Some 25 percent of those respondents said Microsoft provided that service, followed by 17 percent for Google, 10 percent for "Our Web hoster" and 5 percent for IBM/Lotus.

In a March research note, Forrester analyst Christopher Voce broke down the competitive arena for hosted services. "Microsoft's Exchange platform is a formidable force, whether it's delivered on-premises by Microsoft or one of its partners," he wrote. "Google has made some high-profile wins and always seems to be in the conversation. IBM will fight hard at keeping its existing customers and going after new business."

Nonetheless, he added, "It's still early in the game."

Another recent survey, this one from Exoprise Systems, asked 180 IT professionals: "Which cloud-based email platform(s) do you consider to be a viable alternative to your on-premises system?" Those respondents apparently placed Gmail for Business and Microsoft's BPOS/Office 365 at near-parity, with a slight edge to Google.

"We think about 3-4 percent of the enterprise email market is cloud-based today," Matt Cain, an analyst with Gartner, wrote in a May 18 email to eWEEK, "and that Google and Microsoft have the majority of that market and are close to parity on seat count." By the end of 2012, he predicted, some 10 percent of the email market will be in the cloud, expanding to 30 percent by the end of 2015.

In other words, there's a growing pie for Microsoft and Google to fight over-and fight they will, based on all indications.