Google moves to shake up software, take on Microsoft

Search provider Google Inc., moving to broaden its revenue beyond advertising, is poised to shake up the business software market.

The company is bundling the Web-based software programs it offers free to consumers into a premium package and, in a challenge to Microsoft Corp., it will be selling a paid version to businesses.

Google's enterprise product, which will include e-mail, calendar, word processing, spreadsheet, instant messaging, and voice-over-Internet programs, is expected soon, said Dave Girouard , vice president and general manager for enterprise at the Mountain View, Calif., company.

The move comes as Microsoft prepares to roll out Office 2007, the new version of its best-selling productivity software suite, as well as Vista, the latest upgrade of its ubiquitous operating system.

Some businesses, faced with the cost and disruption of upgrading their software, may be ready to turn to Google, said Rebecca Wettemann , vice president at Nucleus Research in Wellesley.

"I think this could pose a significant threat to Microsoft," she said. "Had this happened 10 years ago, it would have been a different story. But we see a lot of folks willing to explore the Google applications right now."

Girouard, in Boston last week to address the annual meeting of the Massachusetts Technology Leadership Council, said Google won't market its corporate product as a direct substitute for Office or Outlook, the Microsoft e-mail program. Rather, the Google software will be offered as "a set of tools that will give businesspeople more choices," he said.

But he acknowledged the Google choice represents a challenge to existing software suites on desktops across corporate America. Google also is selling customized business search engines.

"There's not a CEO I've talked to who doesn't want to investigate, " said Girouard, a veteran technology executive who grew up in Reading. "There's curiosity, but there's also caution."

Much of the caution stems from Google's model of hosting software, such as its free e-mail application, on its own servers rather than those of its customers, meaning they would be outsourcing software programs that are critical to running their business. Companies like Salesforce.com pioneered this "software as a service" model, but the Google move could accelerate its adoption by larger businesses.

Thousands of small and mid-size companies, along with dozens of colleges and universities, already use a free version of Google's product called Google Apps for Your Domain, which was introduced in a beta test version in August. Google adopted the Web-based productivity suite for its own business in October. The company's executives won't give details of what they will add to make the premium package appeal to paying customers, when it will be launched, or what they will charge.

Microsoft recognizes Google's bundled applications as an effort to fashion a rival software ecosystem for enterprise customers.

"It's bigger than any one application," said Don Dodge , senior technical evangelist for Microsoft's emerging business team in Waltham, who heard Girouard's presentation to the technology leadership council. "Essentially, they're saying they'll take over your infrastructure and free you up to do other things."

Dodge said Microsoft, while continuing to improve its robust productivity applications, is countering Google by developing its own Web-based business software, called Office Live, marketed to smaller businesses. "We're both going in the same direction," he said.

Kyle McNabb , principal analyst with Forrester Research in Cambridge, said many companies are loath to "introduce a foreign set of tools" to employees who use Microsoft programs at home and at work. Microsoft dominates in office productivity software, with more than 95 percent of the market, he said, predicting Google at best will be able to grab a 1 or 2 percent market share in the next two years.

"Businesses will play around with Google in their information technology departments," McNabb said. "But they're going to be slow in adopting Google. Most won't jump off Microsoft overnight. They trust Microsoft; their employees are comfortable with Microsoft. Google has much to learn about what it means to be a trusted enterprise partner."

In his remarks to the technology council, which includes many Massachusetts enterprise software executives, Girouard said business technology managers spend too much time maintaining basic software programs. They'd be better off turning them over to an outside firm like Google, he said, and focusing on specialized business applications that differentiate their companies in the marketplace.

Girouard also said business software has become too complex and distant for its users. He predicted that future generations of enterprise software would, like Google's applications, take their cue from the consumer market, stressing simplicity and ease of use. "There's been an artificial wall between consumer technology and enterprise technology, and it's starting to crumble," Girouard suggested.

Serial software entrepreneur Mike Kinkead , a technology council trustee, said Microsoft's new Office and Vista releases could present an opening for Google, because many businesses will be pondering whether and how to upgrade their productivity software.

"The timing may be absolutely perfect," Kinkead said. "The upgrade of Office and Vista is going to force decisions to surface. And if Google is out there with an enterprise sales force that's doing its job, there are a lot of companies that will look seriously at it."

Robert Weisman can be reached at weisman@globe.com.