
Confidential Microsoft brief: 'We're toast if we fight Google on price' - ximeng
http://www.channelregister.co.uk/2013/07/15/microsoft_office365_versus_google/
======
luu
_We all know from experience … with Google Apps you can often have to add a
lot of different third party appliances just to get to parity with the
experience and then all of a sudden you 've got lots of vendors to manage and
all of a sudden it's very different to that low cost price point that Google
initially positioned to the customer._

This is an old story; shades of every high-end vedor that's ever been wiped
out by a low-cost player. As a hardware guy, it reminds me of the response
you'd hear from POWER, PA-RISC, Alpha, SPARC, etc. vendors when you mentioned
x86 workstations.

At the time, my response was, sure, maybe you've got a better product now, but
what fundamental advantage do you have that keeps Intel from using their
large, and growing, userbase and economies of scale to crush your R&D spending
and pull ahead?

Software doesn't have such high fixed costs, and MS has a ton of money to
spend on R&D. But, this still sounds like a lame defense.

~~~
mjolk
Vendor management comes with a real cost (typically in terms of time).

This might be more contentious, but I believe that people that are still using
Windows Server (and Microsoft offerings other than AD) are doing so because
it's easier to use/more familiar than Linux/open-source alternatives: Throw
Joe-Linux on Acme-Cloud-Provider and use Weekly-Flavor-Config-Management?
Sounds hard. Click some buttons and fudge your way through group policy? Now
we're talking something I can do to pay off a mortgage.

~~~
radicalbyte
Microsoft's tooling is easier to use and they've got a massive
training/certification programme.

Because it's so easy, there are a factor more Microsoft admins around than
there are Linux admins. And they're fairly productive.

Plus, Microsoft software works really well together. Windows + Windows Server
+ SQL Server. Works great.

Linux is great if you have highly skilled technicians to support it. There's
way more tweaking involved than with Windows; this makes it ideal for anyone
running a centralised model where they're deploying thousands of identical
machines (like the web). It's not so great for corporate environments where
there's a high level of variance..

It's basically the Ford vs Ferrari argument: Microsoft enables companies to
employ average quality labour to produce a "good enough" result. Ferrari
employ top engineers to produce an extremely high quality result.

Ford scales, Ferrari doesn't.

~~~
Retric
I think it's the other way around if a protect has less than 100 servers MS
may be cheaper if you have 10,000 then Linux is probably cheaper.

~~~
yulaow
The problem is that some of MS products have really nonsense license costs. I
just say: MSQL server.

~~~
radicalbyte
Compared to MySQL, sure. But that's like comparing a spade to digger: both can
make a hole in the ground, but you'll want the digger to do some real work.

It doesn't compare as well to Postgres - but the better tooling may well make
it worth the $10k in licence fees. That's a month of engineer time in
maintenance.

SQL Server's cheap for what you get when compared to the commercial
competition. Informix is pretty much dead (and had horrible tooling). Oracle
is even more expensive. And compared to Oracle, Microsoft look like angels.
Ingres is a bit of a joke.

The big expensive MSSQL licences also include some pretty nifty BI tools,
including decent implementations of data mining algorithms.

------
Spooky23
This is the death of complete Microsoft dominance, not the company. Cloud
email represents a relatively small portion (25-30%) of the total enterprise
market, and Microsoft owns the on-premise market.

Google is maturing as an enterprise vendor, and the simplicity of the
licensing model and lack of client side software is appealing to the "new
economy" companies: small businesses, businesses using Macs/BYOD and
businesses using lots of freelancers/temps.

For the traditional enterprise shops, Google can be a real pain. You need to
buy 3rd party stuff for things like identity federation, for example.

At the end of the day, it's called competition, and it's great. Instead of
Ballmer & Co. coming down off the mountain and letting us know what we're
going to do for the next 5 years, we have a real marketplace and can say no.

~~~
kyllo
The question now is, can Microsoft compete in a world where they are no longer
a monopoly?

They make almost all of their still-quite-impressive profit from the markets
that they still completely dominate, like enterprise productivity software.
They are probably losing money on products like Windows Phone and Surface.

So what happens when Microsoft has credible competition in every market it
sells to? That will soon be the case (if for no other reason than the fact
that Google is actively trying to kill them), and I'm not sure even Microsoft
is confident that Microsoft can compete and stay profitable in that
environment. I see a lot of belt-tightening in their future.

I don't really think a company can get--or stay--as big as Microsoft is,
without the rent-seeking ability afforded by near-total monopoly of a major
market.

~~~
Spooky23
Good question. History (IBM) suggests that they can probably muddle through.

You can ask the same question of Google. Enterprise with Google is a grown up
hobby project that isn't a big earnings generator. Will google apps stay cheap
if googles golden goose (advertising) declines?

~~~
kyllo
_Good question. History (IBM) suggests that they can probably muddle through._

IBM just laid off over 3,000 people last month. To quote pg, "Consulting is
where product companies go to die. IBM is the most famous example."
[http://paulgraham.com/startupfunding.html](http://paulgraham.com/startupfunding.html)

 _Will google apps stay cheap if googles golden goose (advertising) declines?_

No.

Nothing lasts forever. No matter how much we want to think that major
corporations are permanent institutions, they have a lifecycle, and when they
lose control of their market they may continue along for quite a while in a
zombie-like state, but eventually they will wither away and die. Someone
outside of Google will eventually figure out a better way to do online
advertising, and Google will find itself in the position that Microsoft is in
today.

Microsoft is trying really hard to get a new lease on life through a product
pivot, but I'm just not sure it's even possible at this point. Their products
are generally more expensive and not convincingly better than the
competition's.

~~~
ximeng
IBM has 400k plus people according to Wikipedia, so 3000 is really a drop in
the bucket.

Stock chart doesn't suggest imminent death either.

[http://finance.yahoo.com/echarts?s=IBM+Interactive#symbol=ib...](http://finance.yahoo.com/echarts?s=IBM+Interactive#symbol=ibm;range=my;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;)

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kjackson2012
Is this "revelation" really that interesting? Everyone knows that Microsoft
can't fight anyone based on price. Every salesperson in the same situation
knows that the only way to fight low price is by selling based on perceived
value. "Oracle is expensive, but if you compare its value, it's much cheaper."
BMW can't compete vs a Hyundai based on price, they need to compete based on
perceived value. For me Hyundai is more than adequate, because I only look at
my car as a way to transport myself, not as a status symbol or an extension of
my being. For those that do, good for them, and they will find value in a BMW.

Same goes for MSFT vs Linux or GOOG, etc. There's nothing new here.

------
snorkel
Office suite is still the Adobe Photoshop of business software. Office is
still deeply entrenched in businesses and holding on because it still offers
the most features.

For example, Excel vs. Google docs: you can do basic charts and graphs in
Google docs, but clearly Excel has many more features, such as data analysis
tools, and when you connect Excel to Microsoft SQL server you have reporting +
data mart, where Google Apps offers nothing similar (not without a lot
development work needed to set it up)

Google Apps is good but often you still find businesses also need Office
suite. If Google were to say, directly connect Google docs to a data warehouse
tool such as Dremel, the add a lot of advanced data analysis features to
Google docs, then things would start to get interesting.

~~~
ashayh
Excel has vastly more features than Google Docs.

At all the companies where I've worked at, I've never seen anyone use anything
more advanced than a few basic functions.

The _vast_ majority of users in a corporate environment use: 1> Font changes
(color, size etc) 2> Images 3> Hyperlinks, ToC and other forms or document
organization.

It is silly to buy 1000 Desktop or Office 365 Excel licenses, when only 20
people will use a substantial amount of its features.

More importantly, people are not emailing each other Office documents. I've
seen companies who do _have_ google docs do it.

~~~
notahacker
Sure the vast number of users use only a tiny fraction of the functionality,
but many of them also [sometimes] need to open important files that someone
has spent hours painstakingly making impossible to open in anything other than
Excel.

If I wasn't being emailed Office documents on a daily basis I'd assume my
colleagues and clients didn't like me any more!

------
sz4kerto
It's quite instructive to talk to big (>10000 employees) companies who tried
to migrate to Google Mail/Apps. There are nice disaster stories around.

~~~
lclarkmichalek
There will be disaster stories around for any big migration. I can't say I'm
particularly enjoying my university's migration to Microsoft's email offering.

~~~
bdcravens
Exactly. There's a tendency to throw around bullets points of advantage (It's
open! It's not big-bad Microsoft, but a company you can TRUST! etc) as if the
things are enabled by flipping a switch or the ethics involved are far more
important than bottom lines.

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mtgx
If companies, especially non-US ones, had any sanity, they'd "toast" both of
them after the NSA revelations.

~~~
venomsnake
Why? A medium business running in Romania has much more to worry from Romanian
government/tax authorities than US security agency overreach.

And even if they do - where to go? A lot of non it companies don't have even
real ops ... hosting your own email and servers is expensive in that case. And
potentially dangerous a modest string of bad luck could wipe you.

~~~
mtgx
You don't need to use Gmail as a business. There are a _ton_ of alternatives,
from all places.

And _precisely_ because a company like Microsoft or Google would do this, you
need to fear them, because they would do this with other governments, too,
_including_ the Romanian one. It's not just NSA you have to fear. If the laws
allow it, the Romanian government could get all your secret documents from
Skydrive or Gmail, just as easily.

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schrodingersCat
There's something to be said about simplifying your product line. I guess
msft's approach is: if we can't beat them on price, confuse the hell out of
them?

~~~
mathattack
It's two different business models: Simplicity versus Total Solution. Starting
from scratch simplicity usually seems better, but as companies grow they (for
good financial reasons) wind up doing a lot of 1 off solutions in the name of
flexibility and being customer-centric.

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jjindev
Apple is the most valued (market cap) platform company because it owns the
affluence market and commands high margins across the board. Google has gone
after the "next billion" users, people who don't have that kind of money. MS
might be trapped in the middle, neither sexy enough to be Apple nor cheap
enough to be Google.

~~~
bornhuetter
Your comments only really apply to the consumer market.

Microsoft's position in enterprise is extremely strong. Apple is not making
any serious attempt to challenge that (and probably never will), but Google
(and Linux) pose a real threat to Microsoft in the long run.

~~~
jjindev
Yes. I was thinking in terms of the three as consumer platform companies.

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markm248
Or said another way: 'We're TOAST'.

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decryptthis_NSA
*'We're TOAST if we fight Google on price'

Assuming the offering is just the same, but for many it may be good enough

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homosaur
MS: "Let's fight them instead by giving as much user data to the government as
possible, grab some more contracts. We need something reliable and easy to
use. Does anyone know how to install Linux?"

~~~
homosaur
HN: "We are NOT going to tolerate jokes here, this is Internet a.k.a. SERIOUS
BUSINESS. Now let me tell you about my disruptive verticals."

~~~
untog
We tolerate jokes. Just not bad ones.

~~~
homosaur
Thanks for your humor advice, I will cherish it always.

