Microsoft Calling Out Google or Vice Versa?

A couple weeks ago, Google and Sun Microsystems announced an alliance to help promote each other’s products. One of the most vital components of this collaboration was said to be the open source office application, OpenOffice productivity suite that competes with Microsoft’s MS Office suite. Earlier this week, Google dropped a couple of hints on how it plans to advance the OpenOffice movement. Almost simultaneously, Microsoft unveiled a new initiative to deliver more of its software’s features and services over the Web, in hopes of ultimately obtaining a larger piece of the burgeoning online advertising market that has been fueling the explosive growth of Google.

In early October, Google-watchers began frenzied speculation that the search giant was teaming up with Sun Microsystems to offer a complete office suite which would set out to destroy Microsoft. Most were deeply disappointed when Google-Sun announced they were working on a mere tool bar together. On Tuesday, however, the search engine giant lit a small fire under the Web’s favorite rumor and confirmed it is indeed working on improving the OpenOffice productivity suite.

Chris DiBona, Google’s manager for open-source said in a statement to US industry news service News.com: “We want to hire a couple of folks to help make OpenOffice better”. DiBona justified Google’s open-source embrace, stating: “We use a fair amount of open-source software at Google. We want to make sure that’s a healthy community. And we want to make sure open source preserves competitiveness within the industry." In other words, Google, who is already battling head-to-head with Microsoft in search, instant messaging, e-mail, and even in court over a fairly recent hiring of an ex-employee of Microsoft, wants to take part in building a cheaper and more functional alternative to MS Office.

On Tuesday, Microsoft countered Google’s newly publicized plans by unveiling a new strategy to unfasten its applications from computer hard drives and make them ready to use online. The Redmond, Wash.-based company revealed two new advertising-supported Web services major, Windows Live and Office Live. Microsoft’s new “software-as-a-service” strategy hearkens back to Microsoft’s original announcement of .Net five years ago, when it was unclear what exactly .Net was, but there were intimations that users would be able to use Office online via a Web browser.

According to Microsoft’s Co-founder and Chief Software Architect Bill Gates, Windows Live is a set of integrated, Internet-based personal services, such as e-mail, blogging, instant messaging, security and data storage. While MSN.com will continue to operate, Windows Live will offer many of the same features. For example, Microsoft plans to eventually move MSN’s e-mail, as well as its free Hotmail service, to Windows Live.

Office Live, on the other hand, will give smaller companies access to many of the features in Microsoft’s collection of programs for business tasks, as well as the ability to maintain corporate email accounts and data. While Office Live will not offer word processing or spreadsheets, it will include 22 applications that will help automate accounting and project management.

Both Windows Live and Office Live will be supported in part by online advertising, but will have payment tiers with the lowest levels free and ad-supported, and higher-end versions paid for by the user. According to Gates, Microsoft will offer companies both licenses and subscriptions, while giving them the option to choose to run the software on their own servers or as a “Live” service. Furthermore, to acknowledge any potential antitrust concerns, Gates affirmed that Windows Live is built off published APIs (application programming interfaces) that its competitors will also have access to.

While Gates has made it clear that Microsoft’s latest online push is meant to compliment and not replace its core franchise of licensing software for installation – a business that continues to make it one of the world’s most profitable companies, this most recent and ambitious move by Microsoft confirms its seriousness in fending off the growing threat from Google and other online ad-driven competitors that have built immensely profitable businesses by delivering information and software-based services over the Web. Microsoft’s new advertising approach is quite a substantial shift because only a few years ago, the company was looking into establishing a subscription model in paying for software.

According to Microsoft’s Chief Technology Officer, Ray Ozzie, although the traditional software industry remains very profitable and well understood, online advertising is an “important opportunity”. Ozzie gave props to Google for building an online ad engine that clicks “on all eight cylinders,” but pointing out that the industry has barely scratched the surface of the online advertising market, which he believes could grow from US$15 billion now to US$150 billion by 2015.

Microsoft’s announcement on Tuesday is undoubtedly a placeholder for other, more revolutionary initiatives to come. Gates himself described the company’s new strategy as a “revolution in how we think about software”. Most industry analysts believe that Microsoft has little choice but to shift more of its business online because the Internet is progressively becoming the preferred computing platform for both households and businesses. Technology industry expert, Rob Enderle, who has a slightly different take, took it one step further stating: “This is all about Microsoft really pointing all its resources at Google.”

In response to Microsoft’s newly publicized initiatives, a Google spokeswoman, Eileen Rodriguez, said, "We welcome all technological innovations that benefit users and businesses by helping them connect to the information they need." With $40 billion in cash on hand, Microsoft brings plenty of muscle to the battle. The company’s flagship Windows operating system, which controls the majority of the world’s computers, gives the company a huge foundation on which to build an Internet platform. Of course, Google, proprietor of the world’s most widely used search engine, most would agree, also has a pretty solid foundation to build upon. And the war wages on.

Sources:

http://news.zdnet.com/2100-9593_22-5920762.html
http://www.nytimes.com/2005/11/02/technology/02soft.html
http://www.theregister.co.uk/2005/11/01/google_starts
_story_avalanche/