Google has had a string of high profile enterprises sign on for Google Apps for Business, like the Swiss pharmaceutical company, Hoffman-La Roche, with more than 80,000 staff using the Google tools, and not Microsoft Office. Quentin Hardy crunches the numbers at the NY Times:
Google charges $50 a year for each person using its product, a price that has not changed since it made its commercial debut, even though Google has added features. In 2012, for example, Google added the ability to work on a computer not connected to the Internet, as well as security and data management that comply with more stringent European standards. That made it much easier to sell the product to multinationals and companies in Europe.
Many companies that sell software over the cloud add features without raising prices, but also break from traditional industry practice by rarely offering discounts from the list price.
Microsoft’s Office suite of software, which does not include e-mail, is installed on a desktop PC or laptop. In 2013, the list price for businesses will be $400 per computer, but many companies pay half that after negotiating a volume deal.
At the same time, Microsoft has built its business on raising prices for extra features and services. The 2013 version of Office, for example, costs up to $50 more than its predecessor.
Microsoft has also jumped on the office-in-the-cloud trend. In June 2011, it released Office 365, and now offers its software in both a cloud version and a hybrid version that uses cloud computing and conventional servers. Office 365 starts at a list price of $72 a year, per person, and can cost as much as $240 a person annually, in versions that offer many more features and software development capabilities. Microsoft says it offers more than Google for the money, but the product has not won many converts from Google.
Google doesn’t disclose how much Google Apps is making for the company, but says more than five million companies are using it, and former employees have said that it’s pulling in a cool billion a year, which is likely to mean somewhat more than a billion that Microsoft is losing.
And Google+, which hasn’t really made a competitive dent in the consumer social networking world, may turn out to be a really strong alternative in the social enterprise side of things. Microsoft had no answer to that until its recent acquisition of Yammer, and the integration of that work media solution into Microsoft’s business strategy hasn’t moved very far yet.
My bet is that Google will steal away a large segment of Microsoft’s Office market, and at the same time, other enterprise players will leverage their competitive strengths — like Salesforce, Oracle, Cisco, VMware, and Citrix — to pull companies away as well. Microsoft is in a difficult position, since it relies heavily on the historic connection of Office and Windows, and now Windows is starting to be a boat anchor holding it back. Google certainly is linked to Android, but the company is first and foremost all about the cloud, where the more forward-looking companies are heading as fast as possible. And while Google has more toe stubs in the social space than wins, Google+ is certainly a strong competitor to anything Microsoft can offer up, even including Yammer.