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Google recently announced its Google Apps Premier Edition, a package of hosted services for businesses including calendars, word processing and messaging. For a $50 annual fee per user account, businesses can use the suite over the web on Googles computers eliminating the hassles of installing or maintaining software on employees PCs. With the Premier Edition, companies are guaranteed 99.9% uptime, phone help and extra storage. Industry analysts are calling this move a shot at Microsoft, whose omnipresent Office product are filled with extensive features that are overshot for the average employee.

Google Apps is clearly a disruptive entrant. Its features are "good enough for most users, clearly lacking the sophistication of the Office suite. Google Apps will not convert all enterprise applications at any Fortune 500 company today, but will likely slowly and profitably build a foothold market of small businesses attracted by the "pay-as-you-go model and undaunted with storing their data on Googles computers. Over time, Google will increase the functionality of its offering, possibly charging small amounts for "a-la-carte services like video chat or more storage space.

Google Apps is a great example of a disruptive technology that is not necessarily cheaper, but optimized for a different dimension of performance. Amortizing the typical discounted $150 Office license over three years, Googles offering is not saving businesses millions over Microsoft Office. If you measure price alone, OpenOffice, the free open source suite of applications is more cost-effective than either Microsoft Office or Google Apps Premier Edition. However, Google Apps makes it easier for businesses to share their documents internally. CTOs, such as Gregory Simpson of GE, are attracted to Googles web expertise and ability to enable employees to better collaborate, a feature other competitors seem to neglect.

We agree with Google CEO Eric Schmidt who stated that Google is not directly competing with Microsoft, rather that "the two worlds will coexist for awhile. With a "good-enough technology that requires an Internet connection and a tremendous shift in buying habits, Google Apps will continue to attract small businesses and departments within large companies while it profitably builds its product to meet mainstream needs.

See "Google Further Tests Microsoft's Domain. WSJ. February 22, 2007. Page A4