Is Google Apps Unseating Microsoft Office? Stay Tuned

Bloomberg on Oct. 10 posted a fine feature about how a technology chief in Washington inked a $500,000 a year contract with Google to grant some 38,000 municipal employees access to Google Apps.
This includes Gmail and the Google Docs spreadsheet and word processing software, which the article notes are alternatives to Microsoft’s Office productivity suite. We’ve seen these stories before and I’ve written some.
Bloomberg’s Molly Peterson notes that with the deal, “Google is cracking Microsoft’s hold in the business software market.”
Peterson’s story is couched in a way that suggests the choice of Google over Microsoft represents a trend. Rick Turoczy from ReadWriteWeb suggests much the same. I’ve written similar stories, but is it really a trend at this point? I’m not so sure.
I think Google’s Apps market share capture versus Microsoft Office is sporadic and fleeting at best. Google is in Microsoft’s neighborhood, but Microsoft is still the superintendent. Many argue that, thanks to Google’s cloud outages and lack of corporate-friendly fluency, Google Apps is hardly ready for true enterprise adoption.
Indeed, the instance where Washington picked Google Apps over Microsoft is not exclusive. A Microsoft spokesperson noted that Google’s D.C. contract isn’t a knock on Microsoft because the city and school district have multiyear agreements to use Windows and Office.
Google will have you believe that Apps is taking swaths of share from Microsoft’s $20 billion or so Office productivity software business.
Google Apps has over 500,000 businesses using it, ranging from small one-man shops to companies with thousands of employees. Hundreds of thousands of these contracts are paid, with customers paying $50 per user per year for the extra security, no ads, phone support and other features from Google Apps Premier Edition.
But the reality is, as Gartner, Burton Group and other level-headed research companies that aren’t caught up in the hype will tell you, most large regional government and business cases are likely to employ both traditional on-premises solutions and SAAS (software as a service) solutions in the same shop.
That could mean the government or business uses Microsoft Office in one district or department and Google Apps in another other. Or, it could even be Microsoft Office versus Zoho’s SAAS productivity and collaboration suite.
So, Google Apps may secure deals with Sanmina-SCI, Genentech or some government bureau, but the deals are sporadic enough that we can’t really say Google is taking share from incumbent Microsoft in a significant way.
That position could change as we continue the downward spiral into this recession over the coming months and into 2009. If Google Apps really is more cost-effective for businesses than Microsoft Office, as Google claims it is, shops whose contracts with Microsoft are set to expire could switch to Google en masse.
If this trend snowballs, expect Google to not only rev its Apps PR engine, announcing dozens of deals at a shot, but to cut costs on its paid Premier Edition suite. Then we can talk about the trend of corporations choosing SAAS over on-premises suites, and Google Apps over Office.
Stay tuned.