Google Offers Aggressive Incentives To Win Microsoft Office Customers

20 Oct 2015 | Author: | No comments yet »

Google aims at Microsoft with offer to business customers.

Google Inc announced that it will offer its Apps for Work suite free to businesses currently locked into agreements with other office software vendors. The Mountain View, Calif., company is offering businesses free use of Google’s suite of word processing, email and other productivity applications for the life of the business’ existing contract with another provider.SAN FRANCISCO — Google is escalating an attack on Microsoft’s lucrative Office software in an attempt to hit its longtime rival where it will hurt the most.Case in point: Google is now so hell-bent on attracting new Google Apps customers, it’s offering to cover the costs of outstanding enterprise agreements companies may have with other enterprise software companies like Microsoft.

It’s the latest salvo in a yearslong battle between Google and Microsoft in the highly profitable business of building software tools for office workers. Google Apps includes Gmail, Hangouts for voice and video calls (single or group), Calendar, Drive for cloud storage, Docs for word processing, Sheets for spreadsheets, Forms, Slides for presentations and a web site builder.

To that end, the company just announced that any customer with an “enterprise agreement” can use the Google alternative for free for the remaining life of their existing contract, according to this blog post. Google will give businesses access to the suite, which includes Gmail, Calendar, Google Drive, Google Docs and other programmes, at no cost through the remainder of their current agreements. Microsoft, with the Office suite it cobbled together over three decades, dominated sales of office-worker software when Google began making inroads in the late 2000s with its own Web-based email and document tools. The price for the ”Google for Work” software will be waived for the duration of the defecting customers’ existing contracts with Microsoft or any other supplier. The free trial may grab some attention, but Ross MacMillan, Microsoft analyst with RBC Capital Markets in New York, doubts it “will have material impact” on Google’s biggest enterprise competitor, Microsoft Corp.

During the fourth quarter of 2015, Microsoft’s cloud-based Office 365 Commercial, a competitor to Google’s App product, saw its user base grow 74% from the previous year, and it was adopted by 50,000 new small businesses per month during the fiscal year, according to a Microsoft spokesperson. The blog post never mentions any rivals by name, but it’s safe to assume that Microsoft MSFT 0.19% is in Google’s crosshairs, although so to are customers still using IBM IBM -5.77% Domino (once known as Lotus Notes).

Google will also pay $25 per user to help defray the cost of switching software providers. “We’ve been working on being enterprise-ready for the last decade,” Rao said. “We’re at the point where we’re not only ready, but better for companies. The package has made great strides with new features like “voice typing,” but Google remains dogged by the perception that it doesn’t know how to sell into big companies the way Microsoft does.

Data from Okta, a San Francisco company that manages office workers’ logins to Internet services, showed Google’s Apps leading among its corporate customers until a surge late last year made Office 365 the most popular productivity tool among its customers. However, it’s unclear what portion of that gain came as businesses switched from Google to Microsoft, rather than desktop Office customers signing up for the Web variant for the first time. Google’s aggressive grab for Microsoft and other enterprise productivity business is less surprising when you consider how former enemies like Apple and IBM have gotten in bed together to go after large-scale vertical industries like travel and construction with industry-specific mobile apps. The offer underscores Google’s confidence in the quality of its software and its resolve to undercut one of Microsoft’s most valuable franchises, said Aragon Research analyst Jim Lundy said. The Surface Pro 4 and Surface Book are both pitched as productivity devices, not entertainment tablets, and Apple’s iPad Pro is a big-screen tablet with an optional digital Pencil and Smart keyboard (Microsoft actually took the Apple stage and touted Office for the iPad for the iPad Pro).

In theory, volume discounts apply, but big customers have also slammed the complexity of these deals and say they are used by vendors to extract more revenue from the customer. Microsoft’s Office division generated $23.5 billion, or roughly one-quarter of the software maker’s revenue during its last fiscal year ending in June. If Google can truly make this easy, that could be attractive to companies wary of sifting through terms and conditions of licencing contracts and facing software audits by those vendors.

There are technical, cultural, political, and financial challenges involved in switching vendors and products, said Alan Lepofsky, vice president and principal analyst for Constellation Research. But the company has diverting some of the money it makes from advertising to chip away at Microsoft’s dominance in office software since it introduced a suite of competing programs nearly a decade ago.

It helps on the financial front by eliminating the need to pay two vendors at the same time and it helps on the technical side by providing consulting services to assist in the migration. At that time, Google was trying a different approach by requiring an Internet connection to use its software instead of installing the programs on the hard drives of individual programs. Now, Microsoft and most other software makers sell subscriptions that allow online access to their programs so they can be opened on personal computers, tablets and smartphones. Microsoft’s Office 365 for consumers is a success, but there are also a lot of young, future productivity workers who have grown up using Google Docs in school.

Enterprise has a history of using powerful productivity apps, which means Microsoft has the advantage, but Google is willing to fight for its piece of a valuable pie that looks better than the consumer business because it includes monthly and yearly fees and contracts. Google’s new business software offer “represents a continuing saga in the battle with Microsoft for control of the desktop and mobile devices,” Lundy said. Because use of Google compared to Office 365 over 10 years would result in a “13X savings,” Jim Nielsen, manager of enterprise technology planning for Shaw, said via email.

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