1. Define and compare the business strategies and business models of Google and Microsoft. Google: Its business model has always focused on the Internet and the Web. It began as one of many search engines. It quickly ran away from the pack with its copyrighted PageRank search algorithm which returns superior search results for Web users. It also has developed extensive online advertising services for businesses of all sizes. It’s ability to attract the best and brightest minds in the industry helps make it one of the most successful Web-based businesses ever. Google provides value to the user by using an inexpensive, flexible infrastructure to speed up Web searches and provide its users with a vast array of Web-based services and software tools.

Microsoft: Its business model originally focused on the desktop computer running the Windows operating system and Office desktop productivity applications. The company and its products are staples for businesses and consumers looking to improve their productivity with computer-based tasks. While it is trying to expand its presence on the Internet, it still must try to keep customers bound to the desktop computer.

2. Has the Internet taken over the PC desktop as the center of the action? Why or why not?

The technology and computing world seems to be approaching the point where the Internet has taken over the PC desktop as the center of action thanks to Google and software-as-a-service companies. The Internet continues to develop and the availability of broadband Internet connections provide more bandwidth for users. Google’s introduction of the concept of cloud computing allows more and more computing tasks to be performed via the Web, on computers sitting in data centers. Google is banking that Internet-based computing will supplant desktop computing as the way most people work with their computers. Using cloud computing, users are not tied to a particular machine to access information or do work. Google remains responsible for data center maintenance thereby relieving companies, small and large, from the chore. Google is also relying on the increasing ubiquity of the Internet and availability of broadband and Wi-Fi connections to offset security concerns and the potential lack of Internet connections to applications.

On the other hand, Microsoft has a well-established and popular set of applications that many consumers and businesses feel comfortable using. The installed base of Microsoft products provides it shelter, at least temporarily, from the onslaught of Internet-based products and services. Users are familiar and comfortable with Microsoft products and companies aren’t about to throw all of their software out the window. The migration to the Internet away from PC desktops will be a gradual process.

3. Why did Microsoft attempt to acquire Yahoo!? How did it affect its business model? Do you believe this was a good move?

Microsoft realized it needed to bolster its Internet presence. Purchasing Yahoo! would give the company more Internet search market share – 20 percent more on top of its own 10 percent. The merger would increase the possibility of dethroning Google. With or without Yahoo!, Microsoft needs to improve its Internet presence a great deal. It’s online services division’s performance has worsened while Google’s has improve.

Microsoft wants to “innovate and disrupt in search, win in display ads, and reinvent portal and social media experiences.” Its pursuit of Yahoo! suggests skepticism even on Microsoft’s own part that the company can do all of this on its own. It is far easier to simply buy a company that already does all these things rather than try to develop the services and products in-house.

Even though Microsoft’s initial attempts to purchase Yahoo! were unsuccessful, it probably did the right thing. Even if it eventually succeeds and purchases the company, it will be very difficult to integrate Yahoo!’s culture and organization into Microsoft’s. That will deal a setback to both companies.

4. What is the significance of Google Apps to Google’s future success?

The Google Apps suite include a series of Web-based applications that include Gmail, instant messaging, calendar, word processing, presentation, and spreadsheet applications. It also includes tools for creating collaborative Web sites. The applications are smaller, more simpler versions of Microsoft’s Office applications and exclude many advanced features that Google insists most users don’t need. Basic versions are free while ‘Premier’ editions sell for about $50 per year per person. Microsoft Office costs about $500 per year per person. That appeals to small businesses who prefer cheaper, simpler versions of the application. Google has partnered with Salesforce.com to integrate their CRM applications with Google Apps. That created a new sales channel market Google Apps to businesses that have already adopted Salesforce CRM software and its business model of software-as-a-service.

Both Google and Microsoft have opened their software platforms to developers in an attempt to increase the number of applications available for each company.

5. Would you use Google Apps instead of Microsoft Office applications for computing tasks? Why or why not?

Answers will vary but some components that students should include in their answers are:
• Price: Google Apps are free for the slimmed down version or $50 per year per use. Microsoft Office is a flat rate of $500 per year per user.
• Access: Google Apps are available from any computer. Microsoft Office limits its availability to a particular desktop.
• Security: Google Apps may have security risks based on Internet vunerabilities. Microsoft Office has little or no security risks as long as data remains on a secured desktop.
• Compliance with federal laws: Because Google Apps are maintained on central servers owned and maintained by Google, companies may find themselves out of compliance with laws like Sarbanes-Oxley which requires that companies maintain and report their data to the government upon request. No such situation exists with Microsoft Office applications.
• Existing platforms: Many companies have built their computing platforms around Microsoft operating systems and Office applications. They are reluctant to give that up and move to a new platform like Google Apps.

6. Which company and business model do you believe will prevail in this epic struggle? Justify your answer. Students should consider these principles in their answers:
• Developing scale internally is far more difficult than simply buying it outright. In attempting to grow into new areas, Microsoft faces considerable challenges. The industry changes too quickly for one company to be dominant for very long. Microsoft has had difficulty sustaining its growth rates since the Internet’s inception. Even well-managed companies encounter difficulties when faced with disruptive new technologies and Microsoft may be no exception.
• The size, complexity, and bureaucracy of organizations affect the ability of any company to continue to innovate, grow, and expand its reach. (see Chapter 3) As both Google and Microsoft continue to grow, their ability to “turn on a dime” in the face of other competitors may be in serious jeopardy.
• Google currently has the major share of the Web-based advertising market, however Microsoft and other market entrants will be a major threat to them. The Microsoft corporation have very “deep pockets” and will stop at nothing to overturn and destroy Google’s competitive advantage. Legal and regulatory compliance will be a major issue as this market grows and more concerns are expressed from the external environments.
• History, however, is not on Google’s side. Every major company that’s been a force in technology in one era has lost its lead in the next era. For example, IBM was king in the 1940s and 1950s. DEC was king in the mini-computer era during the 1970s. Microsoft was king in the 1980s and 1990s during the reign of desktop computers. Google reigns in the 2000s with its Web-based services. Will it remain on top as technology continues to evolve?