Microsoft Treading Fine Line In The Cloud

I’ll state my bias upfront: There’s no question that I’m a Google fanboy. However, as a longtime Microsoft user – yes, god forbid, I’m even still a PC guy – I like to keep abreast of what they’re up to.

A bit of history

When Google launched Gmail in 2004 I was smitten. I bored anyone who would listen about Gmail-this and Gmail-that. So when Google launched Google Apps for Your Domain in 2006 my ferver reached a whole new level. (In 2007 they renamed the product Google Apps which was good – much less of a mouthful – and bad because you’re average Joe doesn’t realise that he can use Google’s email infrastructure with his own domain name.)

Anyway, ever since 2006 I’ve been evangelising about Google Apps. More often than not, I get blank stares in response, but that doesn’t deter me.

What’s all that got to do with Microsoft?

Ever since Google launched ‘Apps‘ as a way for businesses to save money by moving their email to the cloud, Microsoft has been trying to work out how best to respond. They generate huge revenues from selling licenses for organisations to install Exchange Server, Small Business Server and other software on clients’ premises.

At the same time, according to Microsoft, businesses see email as the low-hanging fruit of the clould. If organisations are moving from on-premises Exchange, then Microsoft needs to provide a compelling alternative to Google Apps. They’ve started doing that with Exchange Online and Business Productivity Online Suite, the latter of which is similar to Small Business Server. (Both services are currently sold by Telstra in Australia, but at some point I’d expect Microsoft to cut out Telstra and go direct.)

This creates two key problems for Microsoft.

1. Revenues – by Google’s calculations, if you have 10 users, the total cost of ownership for Google Apps Premiere Edition is 90% less than Microsoft Exchange 2007. While Google (and I) are biased, if Microsoft decides to compete with Google on price, then a lot of people will move from on-premises  Exchange. And those lucrative licensing revenues will definitely fall.
2. Updates – End users like the Google approach of releasing small updates on a continuous basis; gentler learning curve each time equals less scary. In contrast, they struggle with Microsoft’s approach of introducing infrequent larger changes. Non-techies don’t like changes to IT. I expect that as Microsoft’s cloud offerings catch Google’s they will also adopt smoother, more frequent release cycles.

What does the future hold?

It’s a tricky situation for Microsoft. They don’t want to kill their traditional Exchange cash-cow. But they don’t want to miss out on the “low-hanging fruit.” We’ll have to wait and see how true Microsoft CEO Steve Ballmer’s claim is that “when it comes to the cloud, we are all in.”

For now, as far as I’m concerned, it’s time to ‘Go Google‘.