Microsoft vs. Google: Tech Giants Turf War Heats Up

by Clint Boulton

Google engages in asymmetric warfare with Microsoft, Apple and others. Thanks to its free but ad-supported cloud services such as Google Apps, “Google can spend $1 on Gmail for enterprises and force others like Microsoft, IBM or Cisco to spend tens of dollars or hundreds of dollars for every dollar that they spend,” Austin said. Money Google makes from its paid version of Google Apps is gravy.

Windows and Office are more than solid, but Smith said Microsoft is trying to look for areas of growth, which has driven it to become a competitor to Google. “The conventional wisdom is that Google is going after Microsoft’s enterprise software business. We believe that is absolutely wrong. It’s the other way around,” Smith said: Microsoft is going after Google’s advertising market through search. This is causing Google to go after Microsoft Office with Google Apps. The idea is to keep Microsoft busy defending its installed base instead of investing and focusing on search. However, the Bing team looks pretty focused of late.

Austin argues that Google is an advertising services company, with Google Apps, Google Chrome, Google Chrome Operating System, Android and everything else being ancillary to that end. Google, which has invested millions in all of these so-called ancillary businesses, might disagree, but only after a fashion. It’s hard to argue when Google is releasing most of these software items free to open source, a stark contrast from Microsoft’s proprietary model.

Will Google add another revenue stream by charging entities for access to special data, Austin wonders? Google has all of this info from the Web, plus who’s searching for what, when and where. It can spot patterns. For example, Austin said, Google’s all-encompassing data warehouse could prove more effective in detecting diseases than the Center for Disease Control. The company could then charge for access to this information, perhaps on a paid subscription model.

Smith said while Microsoft is a steward of orderly enterprise growth, Google is focused on consumers. This represents a reversal for Microsoft, which has cooled to consumers in an effort to appear professional to enterprises, where it makes the bulk of its money. In mobile, Microsoft is walking the line between something like Apple’s tightly controlled iPhone platform and the more open approach demonstrated by Google’s Android.

From search to Google Apps and Google App Engine, pretty much everything Google does is in the context of the cloud. Microsoft, on the other hand, is taking an all-encompassing approach to the cloud. Microsoft is juggling on-premises solutions with browser-based offerings, third-party hosted solutions, rich clients and rich Internet applications in Silverlight. Then it’s dealing in mobile consumer electronics with the Zune, as well as traditional licensing models for consumers and enterprises alongside subscription-based and ad-based models. Azure attempts to tie everything together. “In the world of cloud computing, Microsoft is the most ambitious of all of the vendors,” Smith argued.

Google’s Chrome Operating System appears poised to appear on netbooks later this year. Android is popping up on tablets from Archos and Dell. These devices aim to challenge Windows, which blankets the computing landscape. No one knows how this competition will manifest and neither Austin nor Smith would predict how this battle will unfold.

Smith noted how the computing market has changed. Gone are the days when Microsoft could hide $100 licensing fees in $1,500 PCs when Linux and even Windows XP netbooks are selling like hotcakes for $300. Moreover, more and more users are using Web apps on these largely driveless machines. Smith lists Web 2.0, AJAX and, of course, Linux as threats to Microsoft’s computing empire.

Austin said Google is threatened by Facebook and Twitter in social search, as well as the watchful eye of government regulators. All of these issues conspire to draw Google’s attention away from building Internet market share on the desktop and on mobile devices.

Google is afraid of ISPs and telephone companies taking control over what it can do on the Web, which is why the company is developing broadband networks to own the pipes and push the envelope. Microsoft is concerned about declining price points, the evaporation of software maintenance revenues and HTML5 Web Apps. Both companies are concerned about government regulation.