Microsoft Live Battalion

Introduction
I have been avoiding discussing Microsoft Live for as long as possible, but today I will have to start. Bill Gates has launched Microsoft into the “Live era” as the company likes to say. The company has finally gotten around to copying some established products and establishing its own front in the war between Google, Yahoo and other internet giants. Some experts believe that Microsoft will not get anywhere with its efforts:

And while Microsoft has talked about accelerating its business by offering services, some analysts worry that its race to compete with Google and others could leave Microsoft’s very profitable business model in the dust. (source)

I am however not as optimistic and I am very much afraid that if a behemoth like Microsoft is given a chance to rear its ugly head, the fate of other companies might be very grim.

While the "live" software push is seen mainly as an effort to compete with rivals such as Google and Yahoo, there are a number of smaller companies that suddenly find themselves in Redmond’s competitive crosshairs. (source)

The unveiling of Microsoft’s Live software brings up three major questions: possible damage to Google, possible damage to Microsoft and possible damage to third parties. An internet war is starting to take shape between the giants of the web and the giants of software. Everyone has their own agenda and much collateral damage will be taken among third parties. Hopefully the conflict makes the web a better place for the users and is not destructive. But as we know from experience, wars rarely leave their battle zones unscarred.

In the past several months, some insiders and former employees have said that Microsoft has become too bureaucratic and process-driven to compete with nimbler competitors such as Google. (source)

To get ready for the competition Microsoft has reorganized itself to streamline decision making. The company has been split into three independent branches that answer to Steve Ballmer, the company’s CEO. In my mind this is Microsoft’s mobilization for the oncoming wars. In the words of an insider email sent to Microsoft employees by Steve Ballmer:

Our goal in making these changes is to enable Microsoft to achieve greater agility in managing the incredible growth ahead and executing our software-based services strategy

Possible Damage to Google
For Google the damage comes from direct clash. Windows Live Mail Beta is very much like GMail Beta. Both services are providing around 2GB of storage with similar interfaces and a Java based programming (so you don’t have to wait for every site to load). For Google the treat comes from that Microsoft has a whole lot more people in its Hotmail accounts that Google has in their GMail accounts. For now Google has been able to win over users from Hotmail but mounting competition may stop that trend. Google is already being challenged by increases from Yahoo and providers such as 30Gigs.
Google might carry a good brand name and be very popular with users that spend a good chunk of their lives on the internet and around computers. For the average user though, Microsoft is a better known and more trustable name for software. Over 37% of people might know Google’s great search engine, but Google software’s user base is much smaller. Services such as Blogger are in a fit to compete with “convenience” providers like MSN My Space. Google has a jump start on Microsoft and its worth is soaring, but Microsoft has a lot of weight to throw around. Google has to now play keep-away from Microsoft and try to knock the competitor down from their feet before they get started.

Possible Damage to Microsoft

Analysts say the move is probably necessary to help the company compete with rivals that threaten to offer online equivalents to some of Microsoft's cash cows, like Office. However, depending on how far Microsoft takes the strategy, it could also put the company in competition with its existing--and already lucrative--way of doing business.(source)

The biggest damage to Microsoft is the mishmash between its current model and the model needed to succeed in the internet market. Microsoft has been fueled by high-volume, high-margin software. The web business model requires the company to be fueled by low-margin advertising. Sadly (or maybe Happily), Microsoft can not provide its software at the same rate and make effective internet products. Making advertisement fueled products is bound to cannibalize Microsoft from the inside.

Bittman thinks Microsoft could eventually outflank Google but, ironically, find itself worse off. "I think Microsoft can win, but in the end it means Microsoft loses, unless there is some other magic there we don't see." (source)

Possible Damage to Third Parties
Microsoft’s offers of free calling, free virus scanning and free contact management are putting some companies in a jam. Most small companies are downplaying the risk and saying that Microsoft will never catch up to them. However, everyone knows the speed of Microsoft from experience. Google has no need to stop Microsoft in some of its markets and neither do any other big companies. VoIP providers might get some “help” from Google if it tries to stop Microsoft’s moves into VoIP communication, but Google Talk is not proficient enough as of yet to battle it out with MSN. On the security front, there are some big companies like MacAfee and Symantec to hold their ground against Microsoft, but the have enough quarrels between each other as is. Some markets though, (like the contacts market) have no big companies in place and are Microsoft’s for the taking. I think the companies in those fields are watching a very fine line by downplaying the importance of Microsoft’s infringement into their markets. For their sake, I hope the downplay is on a public one and not present inside the companies.

Conclusion
As of now, the future of Microsoft and Google is still too far away to predict. Google has the agility behind it, but Microsoft is trying to become more agile, again. Google has a wonderful capital value, but Microsoft’s capital value can not be compared to. I think that Google and Microsoft are very much on par right now in the internet software market. Google has a lead and better agility but Microsoft has a lot more money and is know to be quick to catch up. The best strategy for Google I think is to try to undermine Microsoft by cutting off the company’s shrink wrapped, high-margin OS and Office sales. Google has already taken a step forward by allying with Sun Microsystems, but Microsoft is trying to counter that with Office Live. The trick left in Google’s sleeve (if they want to undermine Microsoft) is to release a Google OS. I can not predict exactly what the two internet giants will do and will be watching their activities closely.