/>
X
Business

Google expands horizons, competitors have their hands full, and government can relax

The U.S. departments of Justice and Federal Trade can finally take a break and leave six of the biggest high tech companies alone as Google, Microsoft, IBM, Sun-Oracle, SAP and HP-EDS lock heads with each other on equal footing.
Written by Doug Hanchard, Contributor on

The U.S. departments of Justice and Federal Trade  can finally take a break and leave six of the biggest high tech companies alone as  Google, Microsoft, IBM, Sun-Oracle, SAP and HP-EDS lock heads with each other on equal footing.

These giants are all financially stable and have deep pockets to challenge any of the others. Not far behind these competitors are Nokia, RIM, and Motorola with other niche players vetting for a chair at the big table. There might be a few FTC complaints and a few skirmishes that trigger preliminary antitrust reviews at the Justice Department, but nothing of significant material impact for us. Microsoft has had enough time in court houses and clearly would love to avoid the legal limelight in the foreseeable future. Government oversight of these companies is likely to drop dramatically in 2010. If the companies can avoid a few landmines before them, it should be a quiet legal year.

Google's foray into the wireless handset arena is creating a stir. Google is by far the biggest search engine destination, content provider and advertising destination in the world. It has launched a series of new programs such as Google Scholar, Wave and other applications, designed to influence its customers to use Google as its first source of multimedia content. Google's primary business is advertising revenue. It is expanding into areas that it believes are important to maintaining that revenue stream. There is a hidden gem in this business model. More on that later.

Google's Nexus One phone is one of the approaches it believes strengthens the advertising revenue model. Rather than relying on handset makers such as Motorola, Nokia, LG or HTC (who make Google's Nexus handset) to create its vision, it has created its own specifications in design and applications embedded into the hardware.  Google outsourced the manufacturing of the phone to HTC, who is also a co-developer and user of Google handset operating system Andriod.

Is Google the next generation variation of an industrial multinational? Many think not, although its revenue streams are a strong cash cow. It is also immune to antitrust litigation anywhere in the world with respects to its core business of marketing and advertising space. Google's corporate maturity suggests that it can afford to experiment in several industries such as communication devices and not impact its financial stability. If Google creates a significant impact in the wireless handset industry, Google has plenty of leverage to make a deal with any or all of the wireless providers and handset manufacturers. Google wins if it creates significant market penetration or not by simply being a disruptive entrant into the arena. Many are suggesting that it's a defensive play to maintain its direct user interface with the company and its advertising content. Is it (Nexus One) critical to Google's long term business model is the question many are asking. Steve Ballmer of Microsoft is quoted as saying "the smart handset will be the dominant consumer device in the future", surpassing the PC as a reading and application device.

Motorola has plenty of experience being a multinational company with its business units covering 40 plus industries, namely aerospace and communications. Many think Motorola's days were numbered as a significant player in handsets but continue to innovate and fight back. It wouldn't surprise me if Google acquired Motorola's handset and wireless business if it so choose to get serious about competing in that market segment. Such a merger would not likely attract attention of the Justice Department and it certainly wouldstep up competition and put RIM and Nokia squarely in its sights.

Microsoft and Oracle are no doubt watching what happens at Google over the coming decade.  Microsoft has a few hardware products, namely X-Box, mice and keyboards, but they have not strayed far from its core competency of Server, PC and smart phone software. If Google becomes successful with its Nexus One launch, Microsoft will have to react with intelligence competition. Microsoft is keenly aware that small form factor software is an important long term revenue stream.

Oracle has retrenched and become a more focused organization and while many were surprised by its acquisition of Sun Microsystems if it can maintain its system integrator business model, should compete very well with IBM and perhaps others such as Accenture, HP - EDS and SAP. Oracle hopes that Microsoft and Google intensify competition amongst themselves, allowing Oracle - Sun to leave that competitive flank unguarded. Oracle will have to be vigilant because Google has the financial wherewithal to take on Oracle if it chose to do so.

Google made headlines winning the City of Los Angeles Email contract. Is this an outsourcing and professional services play that is a potential threat to Oracle, HP-EDS, Microsoft and IBM? Is this the beginning of Google's entrance into the Enterprise space in addition to its consumer market? IBM is the premier leader in this space, reinventing itself from strictly a hardware based company becoming the largest professional service integrator on the planet. If Google begins to successfully compete against HP-EDS and IBM, then SAP will be next on the radar screen. If Google gets serious about this space with applications like WAVE and continues to build its expertise in PHP and mySQL integrated with professional services then, this is potentially very stiff competition to SAP. Google has the best cost model of any of the big players in this space. Its applications and developers are some of the best paid in the business and employee retention is a Google's hallmark. The single biggest advantage Google has is its software development costs. All of its platforms are used in the most challenging environment possible - the Internet. It continually improves its products and services that are subsidized and paid for by consumer usage of its applications. Every crash or problem Google has experienced increases the knowledge base of how to avoid them in the future and considering the scale and size of its customer base, the company's capabilities are likely as good if not better than any that IBM, SAP or HP-EDS have. Google's ability to monetize open source software is legendary in the software community and not showing any signs of weakness. By comparison, every other competitor is inevitably linked to their in-house proprietary application development and associated capital costs.

Google's business units now span across four important business segments (Government, Electronic Publication, Consumer and Commercial SMB / Enterprise), three of the best sources of revenue generating industries (advertising, communications and arguably hardware) in addition to its non-profit foundations. But can Google really take on so many different players, verticals and industries and be successful, and avoid self imploding? There's more than a few 'ands' in this equation and time will tell which of the 'what if's' will take place. Google just announced that they are getting into the energy business, but not for reasons you think. Still, it makes one wonder, at what point is Google going to stop? It's highly doubtful DOJ, FTC or the EU will intervene anytime soon.

Editorial standards

Related

The 16 best Cyber Monday deals under $30 still available
Amazon Fire TV Stick 4K

The 16 best Cyber Monday deals under $30 still available

Apple names the 16 best apps and games of 2022, with BeReal taking top honors
App Store icon

Apple names the 16 best apps and games of 2022, with BeReal taking top honors

Don't miss the 98 best Cyber Monday deals still available now
Large white Cyber Monday text with electronics behind it

Don't miss the 98 best Cyber Monday deals still available now