The Inbox War: For Google, Microsoft, the battlegrounds are comfort zones and costs

Barring any last minute changes, a Microsoft vendor is poised to win the e-mail hosting contract for the state of California. And Google, which has cried foul over the state's wording for bids for the contract, is left standing on the sidelines as a big client slips away.

It's certainly a blow to Google, which has been pushing its cloud-based Google Apps as an alternative to more traditional systems, such as those offered by Microsoft. Sure, Google has made a name for itself as a player and scored a few big wins, such as the city of Los Angeles. Despite some speed bumps in the implementation process for Los Angeles, that deal actually sent a message to others that Google is capable of handling big prime-time contracts.

But is prime time ready for Google and its cloud offering?

California could have been a big win for Google but it was pretty clear about what the state wanted in an e-mail system - and it sounded a lot like what Microsoft is offering. That's not to imply that the state crafted its Invitation For Bid (IFB) to give Microsoft an edge. Instead, it did what government agencies do: It crafted a list of requirements based on what it's had in the past.

Also: Will cloud computing economics add up for Microsoft?

For the end-user, the look and feel of the inbox - from the way messages are sorted to the placement of shortcut tools - is what defines e-mail, not whether the servers are in a chilly room in the basement or in a Google data center somewhere in middle America. For many of them, the Outlook inbox is where they learned to manage email.

For the IT folks, e-mail is more complex than that. There's a lot of behind-the-scenes configuration that goes in to helping get - and keep - employees connected. And, of course, the execs want to know how it all will affect the bottom line.

In some ways, Google is the victim of its own innovation. In Gmail, for example, Google thinks that users shouldn't sort their messages but instead should search for particular messages by using keywords. Likewise, it prefers to display messages as threaded conversations, but that can be confusing for some users.

But, as Google is fast learning, you can't always give people what you think they want or need. Sometimes you have to give them what they're asking for.

At an analyst's meeting where the company was talking up its Azure hosting service, a Microsoft exec took a few jabs at Google as he pointed to a few customers as "Google Winbacks," those who had left Google to come back to Microsoft.

That's actually a bit of an overstatement as at least one of those companies highlighted - Phaeton Automotive Group - wasn't quite the Google Winback that fits into Microsoft's example.

Phaeton, a group of auto dealerships in Toronto, Canada, had not been a Microsoft customer before it had gone Google. And while it's true that Phaeton had a number of issues with the Google platform, including directory access across multiple domains and setting up IMAP mailboxes, Microsoft offered a lot of what Phaeton had been looking for - something a bit more traditional that also met the needs of the whole company. With Microsoft, employees are back on a familiar desktop client, the IT folks have their on-premise mail servers, and the execs scored some financial savings in the form of concessions to Phaeton for the contract.

In that sense, the battle plans for Microsoft and Google can't be compared on an apples-to-apples basis. Microsoft is coughing up concessions to lure the companies back and, in some cases, selling those companies on a traditional on-premise model instead of a cloud model - even though there are cloud options.

At the end of the day, Google is offering something different - a new way to manage email and a new way to pay for it. Google's challenge: Some companies just want email the old way. Microsoft is offering companies a way to stick with what they know, a familiar model that can bridge to the cloud if needed, wrapped in a pricing structure that says loud and clear that there's a competitor on the playing field.

Google may find its product to be superior - and maybe it is. And certainly, the cost savings are nothing to ignore. But, as was the case with the no-bid defeat for the state of California contract, until Google can give the customer what it's asking for - instead of what Google thinks the customer wants - Microsoft could continue to win some big battles in this war.