Homo homini rodentius est

Is Eric Schmidt leading Google over a cliff?

A bubble in search of a pin…

I’ll tell you, there’s a Pulitzer Prize waiting for the diligent reporter out there who writes the definitive exposé of the role of corporate public relations in driving tech journalism. Of course anyone with a half-functioning frontal lobe fully expects that what they read in tech blogs like Techcrunch and [Scoble] is often just lightly re-heated PR fodder fed to them by the flacks they live by. Occasionally even [wiser heads] succumb to the PR siren song. But it is another thing to see The New York Times publish a 3,600 word article entitled [Google Gets Ready to Rumble With Microsoft] that could have been (and was) pieced together from various bits of “news” seeded into the blogosphere by Google’s PR department over the past few months. The article, which slavishly adopts the David vs. Goliath storyline that has been the prevailing narrative associated with the release of Google’s online productivity application suite, ticks off every one of the “talking points” that the good folks in Mountain View have been pushing:

  • Google and Microsoft are engaged in an epic battle for enterprise users of productivity software
  • Google’s vision of “cloud computing” is the wave of the future
  • Google’s massive investment in distributed server farms gives them an early advantage
  • Google’s development model better matches the web 2.0 space where “velocity matters”
  • Google’s application offerings are being adopted at a fast rate

Contrary to what you might have come to expect from an august news source like the New York Times, these propositions are taken pretty much as they were received from Google with hardly any investigation. How many companies, and of what size, have adopted Google Apps? David Girouard of Google is quoted as saying that about 2,000 companies a day sign up for Google Apps. But most use the free version. And how many churn? Don’t know, the Times didn’t ask. What is Google’s revenue growth rate from these investments? Don’t know. How is Google going to manage Sarbanes-Oxley compliance issues for its enterprise customers and how well does their “perpetually beta” development model map against the need for corporate standards? Oops, doesn’t come up in an article about enterprise software use.

Aside from the piss-poor journalism in evidence, there are two glaring oversights in the article that apparently neither of the two authors (or their editors) caught. First, Microsoft owns about 90% of the enterprise productivity market. This is acknowledged in passing by a quote from Jeff Raikes at Microsoft who mentions that there are 500 million current users of Microsoft Office. But the quote — and it’s implication — is couched in terms of Microsoft’s reaction to Google, which fosters the idea that Microsoft is in a reactive, defensive position. The authors even try to diminish the importance of Microsoft’s overwhelming market share by trotting out the hackneyed blogosphere cliché that Google Apps, Zoho and other fringe players will act to suppress Office revenue and limit the success of Ray Ozzie’s next-generation “software plus services” model.

In fact, Microsoft — operating from a position of utter dominance — can pretty much determine the future of office productivity. Further, they can even leverage Google’s strengths against them. As Steve Gillmor [has written] in a blog post far more sophisticated than anything offered up by the New York Times,

We all know the aircraft carrier analogy about Redmond, where it takes so long to turn the ship. In this case, the rudder was turned just in time — 7 years ago. Similarly, the work on the Tablet PC was forged in the same time frame, the XML framework and communications servers, Hailstorm, and all the other things today instantiated by… who?

Right. Google and Apple. The iPhone is the revenge of the Tablet, as Google Apps is to Hailstorm. Combine the two, and you have a dynamic relationship that is empowering users to switch off of Office and even Windows to the new OS, where Windows and Linux and Solaris and OS/X are abstracted by SilverLight et al runtimes. Does it make a difference whether the runtime is Flash or Silverlight to the iPhone user? Does it make a difference to the user whether the document creation engine lives on the hard drive or is acceptably and intelligently cached where needed between cloud and device?

When these distinctions become invisible to users, the economics of the distributed virtualized model become impossible to stop. With the iPhone, we are already there: despite the ephemeral latency issues of the Edge debate, the on-demand nature of the experience trumps any other system based on access alone. Applications that manage collaborative communications in near-enough real time are not simply competitive with the static firmware model, they force the previous generation of apps to reinvent themselves or be abandoned.

This is not a Google Apps versus Office fight, therefore. This is an Office versus Office fight.

In other words, just as they did with integration of the browser once Netscape had opened the doors to the internet, Microsoft can leverage the early work at fostering adoption of distributed computing models that Apple and Google will provide and then migrate their existing customers to their own version of… software plus services. Office productivity is Microsoft’s market to lose more than Google’s to win and Ozzie’s vision will prevent that from happening. The act of disruption to the traditional office software model came not from outside Microsoft, but from within. Instead of pitching the article in terms of the questionable likelihood of success for any challengers to Microsoft’s Office hegemony, the Times parrots the Google party line that it is Microsoft that is on the defensive. Writing from a place of greater familiarity with the issues involved, Gillmor calls game over and says that Microsoft has already won. But, contrary to what the Google PR department and their friends in the press who are so enamored of the “David and Goliath” storyline would have you believe, it was never really a contest.

Which brings us to the other glaring oversight in the Times article. The authors commit a sin that more seasoned journos (who clearly aren’t consigned to the tech beat) wouldn’t have made — they bury the real story. The article starts out by talking about the history of Google CEO Eric Schmidt, a history that seems to consist largely of playing second or third fiddle to the boys in Redmond. The implications of this history on Schmidt’s decisions about the direction he’s taking his current company are never developed, but I suspect they are important. If Google is investing billions of dollars of shareholder money in a strategy that is unlikely to succeed, isn’t that important? Google has been remarkably successful in the search advertising space and, so far, remarkably unsuccessful at generating revenue in almost every other venture they’ve undertaken. How much is the assault on Microsoft’s stronghold a personal matter to a man who has consistently been on the losing end of the competitive struggle at his previous companies and who might now feel he operates — for once — from a position of strength? If I was a Google shareholder, I’d be wondering.

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