February 2008 - Marketing Methods

The Battle for Control of the Digital Universe

By Peter Koeppel

Microsoft and Google are the two most valuable technology companies, according to Bloomberg, and they are currently engaged in a battle to control “how consumers and corporations work, shop, communicate and go about their digital lives,” according to a recent New York Times article. Google sees all these things happening through a web-based system, but Microsoft envisions a future where most of these things happen through desktop PC software.

By offering web-based computer software applications, called Google Apps, for word processing, e-mail and spreadsheets to companies, universities and individual consumers, Google is trying to change the software business and-in the process-is directly challenging Microsoft’s PC software empire. “If Google succeeds, a lot of the value that Microsoft provides today is potentially obsolete,” David Yoffie, a professor at the Harvard Business School, told the Times.

Taking on Microsoft will not be an easy task for Google. Microsoft has a commanding position in the personal productivity software business, with a share in excess of 90 percent and Microsoft’s Office Suite running on some 500 million computers. It’s certain that Microsoft will fight tenaciously to defend its business. It already has been investing heavily in web-based software and large data centers, and is adding Internet features to counter Google’s advances in these areas. Microsoft’s strategy appears to be one where it will embrace the web, while trying to maintain the profitability of its PC-based business.

Some of the advantages of Google’s software include being able to develop and release it more rapidly than conventional software, with new features and improvements added quickly. In addition, it can be accessed from any online connection; you aren’t tied to your PC. Eric Schmidt, Google’s CEO, told the Times that small businesses could greatly reduce their costs and technology headaches by adopting Google’s web offerings. Dave Girouard, who runs Google’s enterprise business, noted in the same article that “a lot of big companies” soon will be using Google Apps. Jeff Raikes from Microsoft dismisses Google’s optimism as wishful thinking. Google must also face the fact that many large companies view Microsoft as a safe choice and may be reluctant to switch software vendors. Companies and individuals also may be reluctant to store sensitive information on Google’s servers.

Ultimately, the success of Google’s web-based software will be dependent upon its cost and ease of use. Business people in a variety of industries are watching this venture closely, to see if Google can be successful in an area outside of Internet search. In the near term, I believe Microsoft will continue to be the dominant force in the software business, but if Google succeeds over time, Microsoft likely will have to lower its prices, which will cut into the company’s profit margins. Whatever the outcome, it should be interesting to watch these two technology heavyweights battle it out for control of the digital universe.

Peter Koeppel is president of Koeppel Direct Inc., a full-service media buying agency based in Dallas. He can be reached at (972) 732-6110, or via e-mail at [email protected].


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