Microsoft Admits a Need to "Compete" with Google Apps
By: Jessica Sanfratello
Microsoft has historically been quick to dismiss Google Apps as a legitimate competitor to the market share the software giant has accumulated with Microsoft Office. As we reported in June, when Google acquired QuickOffice to facilitate the manipulation of Office projects, Clint Patterson - the Microsoft Office division’s director of communications – told the The New York Times that “Google’s primary focus is advertising, so it’s not surprising that they are trying to address the limitations of Google Apps through acquisition.”
Well, it appears that Microsoft has changed its tune to some degree, publically acknowledging Google Apps as a competitor to its Office software by launching a strategic initiative to halt Google’s success on the enterprise-software turf. Google Apps is a corporate software bundle that includes versions of Gmail and Google Docs software for documents, spreadsheets and presentations.
Microsoft has taken action in recent months by cutting pricing, promoting the brand to resellers and by changing how Office 365 is marketed. To further hinder Google’s efforts, Microsoft created a “Google Compete” team, whose purpose is to keep Office customers from buying Google Apps.
Microsoft is facing a few challenges on the software battlefield. One of “Google Compete’s” first targets was Joe Fuller, the CIO of Virginia-based marketing firm Dominion Enterprises. Dominion had recently switched its 4,000 employees over to Google Apps. Fuller explained to the Microsoft team that Office 365 was 50% more expensive than Google Apps, and it was “not as cool” as Google’s software, and therefore, Dominion halted its $2 million/year contract with Microsoft (which included software to support Office, as well as back-end server and database software Dominion continues to buy) to pay $200,000 a year for Google Apps.
Dominion’s software switch is just one example of the challenge and competition that Microsoft is up against. But, since March, Microsoft has taken steps to establish a more competitive strategy, as officials cut Office 365 prices by as much as 20% for certain big companies and universities.
Breaking down the numbers, Google Apps charges $50 per user each year, motivating Microsoft to reduce the yearly cost of Office from $120 to $96 a person. Microsoft also mentioned that Google’s services are not identical to Microsoft Office and there are often hidden costs that many businesses incur to make Google Apps function as desired. Lastly, Microsoft began offering higher commissions to independent software vendors that sell Microsoft products. Google Apps’ commission for resellers is 20%, while Microsoft’s is now 23%.
Interestingly, soon after reports surfaced about the “Google Compete” initiative, Microsoft unveiled its new version of Office 365 at a press event in San Francisco, which may give the company the boost it needs to best compete with Google Apps in terms of functionality, novelty and “cool.” The new version, known as Office 2013, will be accompanied by a preview of several editions of Office 365: Office 365 Home Premium, Office 365 ProPlus, Office 365 Small Business Premium and Office 365 Enterprise. Office users can download the new portal here, for what Microsoft is calling a “Customer Preview.”
At its official release, Ballmer explained that Office will be available in the traditional disc-based packaging, where customers pay a one-time licensing fee. Additionally, Microsoft has introduced a brand new way of selling office which allows it to be sold as a subscription, where a monthly or annual fee is paid by the user for up to five devices. The subscription business model is big news for Microsoft, as they will really be encouraging consumers to engage in the subscription method of payment.
The price of the new Office will be publicly available later this fall, when it nears its official launch date. When Office 365 Home Premium officially launches, it will include an additional 20GB of SkyDrive storage space and 60 minutes of Skype credit each month, along with future upgrades that will be free to subscribers.
“This is designed from the get-go for Office as a service," said Ballmer as he kicked off the news conference. "It's Office as a service first. [And] it's the most ambitious release of Office that we've ever done."
Consumers can register for and start using the Home Premium preview from Microsoft's website for up to 60 days. There is no Mac version yet, but in this hyper-competitive market, they will likely have an answer.
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