Google mojo comes from open source management

Jim Cramer (right) recently  began pounding the table for Google stock at $600, and expects it to hit $1,000. It's already up to $625.

Even at that price its market cap of $195 billion is still dwarfed by Microsoft's $284 billion. It's not too late for Big Green.

So what's the secret? I think it's open source management.

Google empowers its people to try things out, to put them "in beta." And it leaves them there even when they're not pulling their financial weight, because someone else may come along with a Clue, and the cost of leaving a server running is a rounding error.

Google has plenty of what should be considered market failures, in that they don't make money or haven't made back their investment. Google News makes no money. Orkut was a dog. Blogger is a financial drain. Google Health, so far, is nothing.

YouTube has not made back its $1.65 billion price yet, either. But notice the corporate recycling. You can think of Google Video as a direct descendent. It has a business model, and it's integrated with the rest of Google. Could it have gotten so far so fast without YouTube as stimulation? I doubt it.

By contrast, Microsoft invests heavily in products before releasing them. I remember, years ago, advising the company about a major investment, and how they took from my report the lesson it wouldn't pay off. They thanked me for saving them money, and maybe back then that way of doing business made sense.

But you've got this immense store of talent at Microsoft, which spends all of its time fighting internal battles in hopes that something might get out the door later. As opposed to the Google Way, which is to throw it on a server and see what people can make of it.

I've been witnessing some of this at ZDNet HealthCare, in my coverage of Microsoft HealthVault.  While the product was technically good, and it had a lot of institutional support from hospitals, I thought it ignored the need for stronger privacy laws, and an outside analysis proved that concern well-founded.

By contrast Google had a small team working nearly a year on Google Health, which is still not much, and since architect Adam Bosworth left, with no hard feelings, all the public sees now is a directory.

By letting people pound on its ideas in public, in other words, Google saved a ton of money, whereas Microsoft invested heavily up-front but left a key external question unanswered.

And so it goes. Google is so large that its many small failures can't harm it, and its people remain empowered by its open source management style. Microsoft could still behave in a similar fashion, but will its corporate culture allow that?

All I know is while Microsoft dithers, its market share lead continues to dwindle.