Microsoft looks to steal Google’s thunder

Microsoft Chairman Bill Gates talks about SharePoint updates. Image: Microsoft

Hoping to draw attention away from Google’s (GOOG) online software efforts, Microsoft (MSFT) Chairman Bill Gates is set to announce the expansion of a program that lets business customers collaborate on the web.

On Monday at its SharePoint conference in Seattle, Gates is expected to say that Microsoft Online Services, which has been available since September to businesses with 5,000 or more employees, will be open to smaller companies later this year. The subscription-based service offers e-mail, productivity, and audio/video conferencing, and is available now in beta.

The move is more of a tactical maneuver than a new product announcement. Microsoft, which makes billions of dollars in annual profit from its Windows operating system and Office productivity software, is eager to avoid the perception that search giant Google is eating its lunch with new web-based software. Getting aggressive in the online arena is a big part of Microsoft’s agenda for 2008 – witness its bid of more than $40 billion to take over rival Yahoo (YHOO). Google, meanwhile, has begun courting businesses with its hosted software that allows collaboration through e-mail, word processing, spreadsheets, presentations and other applications. And Microsoft wants to make sure those efforts don’t get traction.

But Gates’s announcement Monday is unlikely to keep customers from eyeing Google’s offerings. Blockbuster (BBI), the movie and game rental company, has been using Microsoft’s online Exchange/Outlook and SharePoint collaboration tools in its corporate headquarters in part because the online software is easy for new employees to sit down and use immediately. But Keith Morrow, Chief Information Officer at Blockbuster, said he’ll also be looking at Google’s offerings later this year when he looks to expand the collaboration tools to the company’s thousands of storefronts.

“If we take the scale out very broadly, like into our retail presence, things like Google look very promising for that space,” Morrow said. “The issue in retail is, the software gets very light usage. So if you buy packaged software with a several-hundred-dollar price tag tied to 5,000 stores, there’s no ROI. There’s no business case.”

In other words, while Microsoft’s offerings are more sophisticated for office workers, Google’s more basic software might work just fine for retail employees. Those workers don’t spend all day on a computer, but could use Google’s online software to share messages and images about displays that need fixing or window arrangements that work well.

And that might prove to be Google’s path into the enterprise. If Google can get its foot in the door by offering basic low-cost services to light users, it could gradually encroach on Microsoft’s turf, stealing more customers as its product improves. Of course, Microsoft is not going to stand still and let that happen.