The Battle for the Desktop and Beyond
Microsoft is in the news lately with its Office 2010 announcements. It contains, no surprise, a number of tidbits to make more of the application suite more cloud friendly and less costly. Implicit in this strategy change are signs that more corporate and personal buyers of the suite are looking ever harder at Google’s offering, Zoho’s suite and other products.
For certain, competition is coming at Microsoft’s Office suite. It’s been building for some time and the near monopoly Microsoft’s had here may be at risk. Sun had a pretty good offering out there the last few years but this time the stakes may be different. (Full disclosure: the original version of this post was prepared in Microsoft Word.)
Software markets tend toward standardization. In almost every sector of software, customers eventually move to a few or one ‘industry standard’. The industry standard doesn’t have to be the best technically or the most loved or the cheapest. It can be hated, expensive and a pile of garbage but, at least, everyone else is using it. We’ve seen industry standard solutions appear even when standards bodies are urging the market to adopt something completely different.
Why does this occur? Well, too many people think that software buyers are logical, rational purchasers. News flash: They’re not! Software purchases are: - emotional - financial - political - technical - business - etc. decisions.
It’s this soup of buying factors that helps create monolopies or duopolies.
Yet, in time, innovation, obsolescence, regulation and competition break down these ephemeral monuments to market share.
Google has been coming at Microsoft for some time. Like Microsoft, they have deep pockets and a couple of key products to fuel the cash generation machine. Microsoft also possesses a few nuggets of cash creation and big cash balances. Where one is strong (e.g., Google Search, Microsoft Windows), the other is weak.
These battles are about momentum and not about protecting market share. Google only wins by tackling the market share that Microsoft has in Office. Microsoft wins when its search tool (i.e., Bing) displaces Google.com as everyone’s default search. To win either of these markets is a coup in and of itself. To win both could be a staggering victory for the winner and a going out of business sale for the loser.
Google’s Apps have a couple of hurdles for corporations. Yes, they’re cheap to use but many companies still don’t want their internal information on someone else’s cloud. If Google can’t convince very large numbers of large companies to cutover to its suite, it won’t win. Check out this solid piece in BusinessWeek.
What Microsoft knows is that corporations like to share documents with other corporations, with their workers at home, with sub-contractors, etc. The current Microsoft Office suite, warts and all, operates relatively effectively as a communication tool for all of these disconnected parties. Companies don’t want people reformatting documents that get mangled from one word processor, spreadsheet or presentation technology to another. Interoperability is the key value driver that Google and others must offer to win over customers. To do so, Microsoft competitors must offer something different and value-adding while providing interoperability with Microsoft Office. Microsoft will likely continue to make small interoperability problems for its competitors and the competitors will need to double down on their innovation-added capabilities. This is a see-saw exercise that will take time to sort out. Momentum is great but it must overcome a mountain of inertia.
Interoperability is always the other guy’s problem when your firm offers the (standardized) solution everyone is using currently. Interoperability must address the de facto market standard.
Zoho is different animal all together. They’re interested in building dozens and dozens of applications that play together and play with Microsoft’s products. Their model may actually continue to prosper. Why? Zoho can do what Google Docs do: cloud based inexpensive desktop apps but Zoho can also make their apps run on customer specific servers. Their desktop may now be much broader than Google’s and growing. Zoho is trying to be a software firm with a very wide product offering. A top executive at Zoho described his firm as “‘trying to be the IT department for SMB’s (small to medium sized businesses)”.
Zoho’s market success and longevity suggest that they may be onto something.
Let’s get back to Google though…
Google is also saber rattling about developing a desktop operating system. Android has doubtlessly emboldened them. Personally, I believe this initiative has a better chance of short-term success than its Office-killer apps. An operating system requires a few key hardware vendor sales and some application software compatibility. That means, for their device to gain market share, it must come equipped to run all of Google's tools and applications and a large number of the zillions of software products that also run on Mac and Microsoft Windows platforms. That is a big requirement and an expensive one for Google and every software vendor that is betting that Google's desktop OS will be a winner.
For us, the mere mortals, the consumers of technology, the arms race breaking out in desktop software will likely present several likely outcomes. The following will likely transpire:
- many new products will emerge - many of the new products will contain some amazing breakthrough innovations that will entice some of us to switch - some of the new products will be lacking in needed features and/or disappoint us with substandard performance - low pricing will persist for some time so that new competitors will acquire much needed market share, sales momentum and street cred - all users will likely experience some frustration as files we share with others will doubtlessly experience compatibility issues - Microsoft is definitely going to feel some competition for its Office Apps and Google will likely see Microsoft stiffen its resolve to get more of the search engine business