Today Microsoft is expected to announce a next generation version of Microsoft Office, which is their single largest profit platform even surpassing the Windows operating system. Microsoft is turning their attention on businesses that have been considering switching to Google Apps, which is a corporate software bundle that includes Gmail, Google Docs and Spreadsheets, and presentation software. Microsoft even set up a “Google Compete” team within the Microsoft Office division to stop Office customers from switching to Google Apps.
One of those companies includes a marketing company called Dominion Enterprises in Norfolk, Virginia. Before Dominion switched to Google Apps for their 4,000 employees last fall, Microsoft invited their chief information officer Joe Fuller to the headquarters in Redmond, Washington to try and win him over. Fuller was shown Microsoft’s executive briefing center and road maps of Microsoft products. He was also given a tour of their research labs and new technologies. One of the new technologies allowed shoppers to virtually try on new clothes.
Fuller said that Office 365 was 50% more expensive than Google Apps and was not “as cool” as Google’s software. This is why they halted a $2 million per year Microsoft contract, which included software that supports Office and back-end servers and database software. Now Dominion spends $200,000 per year on Google Apps, but they have not replace all the services that they get from Microsoft. “Google Apps is serving us well,” said Fuller in an interview with The Wall Street Journal.
Office still has over a 90% market share for business productivity software and has over 80% of corporate e-mail users according to research company, Gartner Inc. Microsoft Office is still a large chunk of Microsoft’s profits. For the 9 months ended March 31, Microsoft Office generated an operating profit of $11.6 billion, which is more than half of the company’s total operating profit for the period. However Google is slowly, but surely gaining market share.
According to a report from this past May, Garner reported that Google is now winning one-third to about half of new corporate users that are paying for web-based software. “All of a sudden this looks really serious,” stated Gartner analyst Tom Austin. “By all accounts, [Microsoft] should be burying Google, and they’re not.” Google has won some major customers lately like Costco Wholesale Corporation and pharmaceutical company Roche Holding AG.
This past March, Microsoft cut the cost of Office 365 by as much as 20% to try and win over big companies and universities. For these users, Microsoft reduced the annual cost of Office 365 from $96-$120 per person for a year to offering smaller companies $48 per person for a year. Google Apps charges $50 per user per year.