Tuesday, October 31, 2006

Google's Web 2.0 - Taking the SMB Market from Microsoft

In my previous blog posting, I highlighted the fact that Google's advertising-based revenue model does not justify its market cap. Clearly, the folks at Google are wise to this and are looking for other growth opportunities, and have Microsoft right in the crosshairs. Microsoft offers archaic technology relative to web technologies and there is a lot of revenue ripe for the plucking.

Google has just done another build vs. buy acquisiion (ie, acquisition that did not cost that much) by buying JotSpot. JotSpot is a YAW2 (yet another Web 2.0) company with no viable business model but some interesting features around a structured Wiki that help people easily build intranet features such as holiday calendars and expense management.

Google Office currently offers mail, calendaring, word processing, spreadsheets, and search. It has now added an extensible wiki comparable to SharePoint. Missing are PowerPoint, Access, and Project equivalents but these will be pretty cheap for Google to pick up (DabbleDB, Coghead, Backbase, etc.).

Google Office is not going to target enterprises, at least initially. However, it is clear at this point that Google is going to own at least the "S" in SMB. Small businesses with <50 people no longer need to buy a thing from Microsoft except for Windows XP at an OEM price. What they give up in some individual features will be more than made up with the collaboration and data backup features of using hosted applications in addition to the cost savings of not buying licenses to bloated software and not maintaining software on desktops.