Google calendar – A disruptive application

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Google has launched it’s calendar application today . What are the implications for the web office? Is it part of an upcoming Google online suite – or is it just another perpetual beta product from Google? Will it put the likes of CalendarHub out of business?

I present my insights below and I believe that this announcement reveals a much deeper strategic game plan than previous announcements from Google.

Firstly, consider that of all Google’s products, only adwords / adsense make any money for the company . Ofcourse, they make a LOT of money (according to their SEC filings – it’s 99% of their revenues).

Thus, Google can afford to experiment with a raft of products – most of which are making little money or no money. But I will bet that any company that has 99% of its revenue coming from one source will want to change that situation.

After all, that revenue was built in a matter of five or six years – and could go down the tube in less than that!

So, we can safely assume that the strategists at Google are looking for alternate revenue sources. And they don’t have to look far. In Microsoft’s home territory – one revenue source beckons – i.e. the office suite. The web office is a natural challenger to Microsoft Office.

For some time now, rumours have persisted about Google’s foray into Microsoft’s turf. These peaked around October last year, when Sun and Google announced a joint partnership for Open Office

In that announcement, many rightly perceived Google to be the more stronger partner. Both partners denied that they were going to take Microsoft head on – a wise choice considering the fate of many who have historically attempted it before.

Thus, if we combine these two announcements (SEC filing and OpenOffice partnership) – we see that Google has a majority of it’s revenue coming from one source coupled with a desire to at least explore the revenue streams from the corporate web office scenario.

Thus, a picture was formed late last year – where suggests that Google may persist in being the dominant player in the consumer sector and partner with others to address the corporate sector.

This made sense.

After all, Google is a company more familiar with the consumer front. The corporate sector is not very familiar to it. In keeping with that trend of Google being predominantly a consumer focussed company, many analysts have seen the Calendar announcement as just another Yahoo 2.0

On the consumer front, Google’s strategy has been predictable in some ways .. it could (cynically) be classed as build yahoo 2.0.

In other words, choose a popular yahoo offering, strip it down of excess baggage and give it the trademark simple Google interface. Then add one killer feature such as Gmail’s storage limit or Google Talk’s use of Jabber.

However, I believe that viewing the calendar announcement in terms of a consumer strategy is missing a critical point. That’s because, if you combine the calendar announcement with Google’s acquisition of writely a different pattern emerges.

There are some immediate observations

a) Combined with the writely announcement, it points to a trend to acquire/build best of breed applications which comprise the web office

b) The rationale and future of the Google/OpenOffice announcement becomes less clear

c) The calendar announcement should be viewed in context of writely acquisition and not just another yahoo 2.0. Although yahoo has a calendar, it does not have a writely type product. Combine the two and you see that the target is different in this case, it’s Microsoft – but not via the Sun partnership!

d) In the crossfire, smaller products like calendarhub are in trouble – but that’s not as interesting as the real significance i.e. the impact on Microsoft.

As one has come to expect of Google, the calendar application itself is a classic web 2.0 application with one extra sexy feature. In this case – natural language processing – where you can enter an event through a plain text feature like ‘Meeting with Jane at 3 tomorrow’

But a single sexy feature alone is not enough to make an impact on the CIOs in the corporate world.

Lets explore this subject more

a) Are companies interested in exploring options or switching from a Microsoft suite/Operating system – YES INDEED!

In 2001, Microsoft revamped it’s software licensing policy – and enriched it’s coffers considerably as a direct result of this !

According to http://news.com.com/2100-1001-908779.html

The old program: Previously, companies bought software licenses for each desktop and then picked up upgrades on an as-needed basis. Software upgrades cost about 59 percent to 72 percent of the original license. Typically, customers upgraded operating systems or applications every three to four years.

Software Assurance: Under the new plan, which is available to participants of Open and Select volume licensing programs, companies pay an annual fee that gives them the right to upgrade each desktop for a specified number of years, usually two to three. The fee is 29 percent of the initial license for desktop software and 25 percent for server software.

The rub: Software Assurance is not cheap. Assuming Windows XP costs $100, companies will pay $87 per desktop after three years for the right to upgrade ($29 x three years). By contrast, companies may have paid nothing under the old program if no upgrades were released or if companies decided not to upgrade. Because many companies upgrade only every other version, the no-cost scenario would be common.

Thus, customers WILL switch if they could

b) The Microsoft operating system release history definitely has a pattern . Leaving aside slipped deadlines, releases have happened roughly every three years and, generally, in the second half of the year. Predictably, the latest version (Vista) has slipped .On 21 March 2006, Microsoft announced it has delayed the consumer release of Windows Vista until January 2007

c) Yet, analysts like Gartner recommend that this delay is just a blip. They expect a large scale upgrade to Vista in 2008. . We can safely expect companies to follow this advice!

Thus, it would appear that – while weboffice is cheaper and Google is headed in the right direction with writely, calendar etc .. It won’t affect the next upgrade cycle in the corporate world.

So, is the web office a write off in the corporate world?

To answer that question, we have to look at weboffice for what it really is – A disruptive technology! Further, the critical element that distinguishes web office is its ability to share information and collaborate.

Will this make a difference? And if so how?

Disruptive technologies were first discussed by Dr Clayton Christensen in his seminal book – The Innovator’s dilemma.

According to the Innovator’s dilemma – Dr Christensen talks of new-market disruption which is driven by

a) Customers who cannot be previously served profitably by the incumbent. and / or

b) The new product has features which appeal to a niche sector and thus the product can get a foothold in this sector and subsequently move up the value chain.

This can be elaborated more as per wikipedia

“New market disruption” occurs when a product that is inferior by most measures of performance fits a new or emerging market segment. In the disk drive industry, for example, new generations of smaller-sized disk drives were both more expensive and had less capacity than existing, larger-sized drives. Since size was not an important factor for the early computer market, these new drives seemed worse in every way. With the development of the minicomputer (or afterwards, the desktop computer, the notebook, and the personal music player), size became an important dimension, and these new drives quickly dominated the market.

We then are faced with the question – which sector / segment could be the early adopter customers for this disruptive technology (web office)?

The distinctive feature of web office (sharing and collaboration) offers a clue

I believe that outsourcing companies could be the key driver of web office (offshore or otherwise). They provide a critical incentive for corporates of all sizes to consider web office as a direct means to collaborate with their partners either onshore or offshore through virtual teams. This means, the existing value chain will not be disturbed (for now!) but once web office has taken a foothold through outsourcing/virtual teams – it will move up the value chain – directly challenging Microsoft’s dominance.

To conclude..

I believe

a) The Google calendar announcement – coupled with the writely announcement – reveals a key trend towards a foray in the desktop domain through web office

b) Other players/partnerships will be negatively impacted(such as companies like Calendarhub and the OpenOffice agreement)

c) Inspite of some gains from Google and slippage from Vista – Vista will still be dominant for the 2008 upgrade cycle in the corporate world.

d) WebOffice will benefit from the outsourcing trend where it’s collaborative features and low cost structure offer it a critical advantage

e) Once having gained that foothold, web office will move up the value chain.

Comments

  1. dave davison says:

    Tom Friedman’s “Flat World” is in total agreement with your locating the source of disruption in the outsourcing community.
    The calendar application is the central hub of collaboration, and penetrating MSoft’s Office monopoly through seeding this app and writely in the offshore/outsource world gives evidence that Google India is having an innovative effect on Google itself.

  2. hi says:

    hi