Microsoft And Google Moving More Deeply Into Each Others’ Businesses

Microsoft vows it won’t let its core businesses be undermined by “the cloud.” This article from the NY Times (and related discussion at Techmeme) quotes Microsoft CEO Steve Ballmer saying that Microsoft will compete aggressively with Google and other online alternatives to Office and will offer Web-based versions of all its core software:

“We’re not moving toward a world of thin computing,” said Steven A. Ballmer, Microsoft’s chief executive, referring to systems in which simple processing takes place on a PC, but more complex processing is moved to a centralized computer through a network connection. “We’re moving toward a world of software plus services.”

Nearly every Microsoft software application will be transformed with the addition of a Web-services component within 3 to 10 years, he said.

Even as Microsoft says it’s defending its home turf, the company is of course trying to aggressively compete in the world of search and online advertising, which is Google’s core franchise. Recent purchases of aQuantive/Atlas (for $6 billion) and AdECN, as well as high profile deals with Facebook and Digg, show how serious Microsoft is about being a major player in both arenas.

For its part, Google keeps saying its apps aren’t competing directly with Microsoft, but it also keeps doing things to make its software more appealing to enterprise customers. At Google International Press Day last month, CEO Eric Schmidt discussed some of Google’s enterprise products. Danny summarizes Schmidt’s remarks:

Google Enterprise [server business, as well as the hosted apps]. That business is likely to become a very important business for Google. Notes advertising is 97 percent of business and that they love it.

[Note From Danny: Schmidt also stressed again what he keeps positioning as a new tagline for Google: "Search, Ads & Apps." Google's obviously known for search; it's big on ads but until relatively recently didn't overtly acknowledge that as a core part of its business as opposed to "organizing the world's information." But Apps is an entirely new positioning -- one that has Google targeting Microsoft.]

Other developments such as Google Earth for Enterprise, Google’s acquisition of video conferencing provider Marratech, Google Gears and Google Docs & Spreadsheets, as well as others, are strong evidence that Google is serious about competing for enterprise business.

The advantage of Google Docs/Apps is that typically they’re collaborative, which people like, and accessible from any computer with a browser. Concerns include data security but also the richness and functionality of the applications. But my guess is that “3 to 10 years” is too long for Microsoft to wait to web-enable its critical applications; because by then the free, online options will be much better.