MS Office battles Google in the cloud

When Microsoft releases the next version of its productivity suite, Office 2010, it will be into a very different competitive landscape than the one Office 2007 faced in late 2006.

Back then Google Apps had limited availability, and hardly anyone had heard of hosted applications provider Zoho. IBM had not yet released its free productivity software, Symphony, and while many people liked the idea of OpenOffice.org, compatibility issues with other applications kept it on the margins of most mainstream office environments.

Things have changed since then, with Google more than any other company posing a real threat to Microsoft's Office stronghold. In a little over two years, Google Apps has made headway in the business market, especially among small businesses that don't need all of the advanced functionality Office offers and that prefer Google's US$50 per user, per year price.

Google Apps -- which has much of the functionality that most business users need in Office but adds document-sharing and collaboration features Office doesn't have -- is now used by hundreds of thousands of business users, said Google spokesman Andrew Kovacs.

And small businesses aren't the only ones using Google Apps; the company counts some major enterprises, such as Motorola, Genentech and Sabic (formerly GE Plastics), as customers, all of which have tens of thousands of employees using the hosted service.

Microsoft is aware of the growing threat, and will counter it in Office 2010, which for the first time will include Web-based versions of its most commonly used productivity applications, Word, Excel, PowerPoint and OneNote.

The company believes that by offering choice to its customers, it can retain Office desktop users who may be thinking of a switch to a Web-based application, or win back some customers that might already be using Google Apps.

In a recent interview, Stephen Elop, the president of the Microsoft Business Division, said while the influx of all of these new Web-based competitors to Office is new, the suite itself is no stranger to competition.

Before Office competed with Google Apps and others, it competed with itself in the form of pirated copies people were getting from each other, he said. In fact, more people use free Office versions than use Google Apps, which should provide some perspective on the company's current dominance in the productivity market.

"We have way, way, way, way more people using free versions of Word, Excel, PowerPoint, Outlook, what have you -- way more than Google has or will in a long time using the Google applications," Elop said. "Of the 500 million copies of Office in use today, half of those have been paid for. The other half have been free. Obviously, I'm tipping a hat to people who might borrow software."

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