Microsoft, Google Prepare for Cloud Productivity Fight

Microsoft will release Office 2010 to businesses May 12, with a cloud-based component that allows users to access stripped-down editions of OneNote, Excel, Word and PowerPoint through their browser. That will bring Microsoft into conflict on yet another front with Google, which already offers a cloud-based productivity suite through Google Apps. Whether Google Apps represents a true threat to Microsoft's traditional desktop-based dominance, though, depends on whether the cloud is ubiquitous and reliable enough to attract businesses and consumers in substantial numbers, something at least one analyst doubts. Microsoft also has a substantial budget to leverage for Office 2010's rollout.

When Microsoft releases Office 2010 to businesses May 12, it will open a new front in the IT giants' battle for cloud dominance.

Unlike previous versions of the platform, Office 2010 includes a cloud-based component, with Windows Live users given access to stripped-down editions of OneNote, Excel, Word and PowerPoint through their browser. Full access to Office features is restricted to the full, purchasable version; nonetheless, taking the software at least partially online represents a significant challenge to Google Apps, which has found notable adherents among both consumers and businesses.

For that reason, perhaps, Google felt compelled to appeal directly to Office 2010's potential customer base-both the businesses on May 12, and then the consumers who will have access to Microsoft's new flagship product starting in June.

"If you're considering upgrading Office with Office, we'd encourage you to consider an alternative: upgrading Office with Google Docs," Matthew Glotzbach, Google enterprise product management director, wrote in a May 11 posting on the Official Google Enterprise Blog. "If you choose this path, upgrade means what it's supposed to mean: effortless, affordable, and delivering on a remarkable increase in employee productivity."

Google Docs presents companies with an alternative, Glotzbach wrote, by offering "a chance to get the collaboration features you need today and end the endless cycle of -upgrades.'" The only thing a business has to lose, he added, "is a server or two."

The effectiveness of Google's strategy remains to be seen.

"[Google] is encouraging people to treat Office 2010 in the same way they did Vista: essentially, -Why upgrade when we have XP?'" Charles King, an analyst with Pund-IT Research, said in a May 11 interview with eWEEK. "Google is saying, -If you want online collaboration, we've got a product for you.'"

For Microsoft, Google's cloud-based model represents "more of a threat than the alternative productivity apps have ever been," King said. "There have been interesting challenges on the open-source side, but this online effort is significantly different. For one thing, Google is a much more formidable adversary than Microsoft has ever faced before."

Microsoft's response, King added, is "in essence copying the use and business model of the companies that want to take it down." Office's continued status as a profitable franchise guarantees that it can continue to fight off Google's challenge, even if a weakened economy slows its adoption among businesses.

But for Google Apps to become a true threat to the desktop-based model, according to another analyst, the cloud needs to become more ubiquitous.

"Web apps in general are a threat to client apps," Roger Kay, an analyst with Endpoint Technologies Associates, said in a May 11 interview with eWEEK. But Web apps also require a cloud that is ubiquitous, reliable and high-bandwidth-"and that's not a reality today." Certain "few and far between" businesses could have an internal infrastructure capable of running cloud-based productivity apps with a minimum of downtime, but others will hold off embracing the cloud until they can be ensured of its durability.

"There's this presumption that people will migrate toward the cloud," Kay added, "that assumes connectivity."

Whether Google Apps and its ilk represent a true threat, Microsoft faces some substantial headwinds toward disseminating Office 2010 among businesses and consumers. While Office 2010 may not have the same pressures to deliver in the marketplace as Windows 7, which needed to both revive Microsoft's bottom line and erase the stigma associated with Windows Vista, it nonetheless needs to succeed in order to reassert Microsoft's commanding share of the productivity-software market.

Business spending has only just begun to revive after a long global recession, with Microsoft's Business Division reporting revenues for the most recent quarter that, while still strong overall at $4.2 billion, where nonetheless down year-over-year from the same quarter in 2009. By contrast, quarterly gains marked Microsoft's other verticals, including its Windows & Windows Live Division, Server and Tools, Online Services Division, and Entertainment and Devices Division.

That slower pace of business spending has the potential to affect short- to mid-term uptake of Office 2010 within both SMBs and the enterprise. As an additional incentive to attract both consumers and businesses, Microsoft will offer Office 2010 preloaded on newly purchased machines, with its full features unlockable via a product key card.

The economy-and not the cloud-will likely govern Office's adoption, at least in the short term.