Microsoft's increasingly strong Office 365 performance is coming partly at the expense of Google Apps. Motorola's recent decision to move from an elderly version of Office to Google's cloud service bucks the more common trend of companies who have been using Google Apps switching to Office 365.
It's not just Microsoft saying that Office 365 is growing (COO Kevin Turner claims that four out of five Fortune 500 companies use the service). Last year, cloud security company Bitglass said traffic analysis gave Google twice the market share of Office 365 among its customers, with 16.3 percent of the market; that went up to 22.8 percent this year as more companies switched to cloud services. However, over the same year, Office 365 grew far faster, from 7.7 percent to 25.2 percent. Google has a slight advantage with small businesses (22.8 percent to Microsoft's 21.4 percent) but in large, regulated businesses (over 1,000 employees), Microsoft's 30 percent share is twice that of Google and growing fast.
Office 365 is even more popular with the 21 million customers of Skyhigh Network's cloud security services, where 87.3 percent are using Office 365 services, with each organization uploading an average 1.37 terabytes of data to the service each month.
That fits what identity management company Okta is seeing. Office 365 is the most commonly deployed application among its customers (beating even Salesforce) and adoption is growing faster than any other cloud applications. It's also the cloud service customers use the most, probably because that usage includes all the email users send and receive.
Okta CEO Todd McKinnon does note that the picture is a little different in different parts of the world and across different industries. Google Apps is stronger in APAC, although that may change as Microsoft builds out new data centers in the region (that's already making a difference in Australia and Japan). The only industry segments where Google Apps has more share than Office 365 are in technology; media, Internet and software companies. The smaller the company, the more share Google Apps has among Okta's customers; but even in the smallest companies Office 365 is still in the lead.
"There are different dynamics that matter based on the company size," McKinnon points out. "Large companies need manageability, security, reliability. You wouldn't see this acceleration of Office 365 in large companies without Microsoft doing a lot of work [in those areas]."
The majority of new Office 365 customers are moving from on-premises, but even companies that have already adopted Google Apps for Business are switching to Office. Microsoft claimed they won back 440 customers in 2013, including big names like Burger King and Campbell's, and the trend is continuing. Some of that may be the halo effect of the Office 365 growth making companies that picked Google Apps question whether they made the right decision. But often, it's because of dissatisfaction with Google Apps itself.
The simplicity of Gmail and Google Docs clearly appeals to some users, but as one of the most widely used applications in the world, the Office software is familiar to many. "When you put these products into companies, the user interface really matters," McKinnon says. "For email, the user interface really matters. Google Apps is dramatically different from Office and that's pretty jarring for people who've been using Outlook for a long time. It's like it beamed in from outer space; you have to use a browser, the way it does conversations and threading with labels versus folders, it's pretty jarring."
And it's hard to use Outlook with Google, many customers report. "Some companies, they go to Google and they think they are going to make it work with Outlook; what they find out when they start using the calendar is that it just doesn't work as well with the Google Apps backend as it does when you're using Office 365. The user interface is so important that it pulls them back in. Even if you like the Google backend better, you have thousands of users saying ‘what happened to my folders?'"
Buying Office 365 for Office
That's what Glenn Jimerson, currently CTO of fintech startup Loanatik found with an earlier startup. "I've deployed Google Apps in three different startup and I personally like it for many reasons, including the price; it's great bang for the buck." But while young founders and employees, especially Mac users, were happy with Google Apps for the basic document tasks they were doing, other, older workers found they weren't as productive without Office. "I got a lot of backlash; they weren't happy that it wasn't Outlook. They were saying ‘I really want PowerPoint to do my presentations.'"
The tipping point was a new CEO who insisted on working in Outlook. When Jimerson looked at the options, Office 365 made more financial sense than just buying the Office software. "We would pay Google Apps $5 a month and then we'd have to buy the Office suite for each computer. If you're pushing somebody who's used to an Office environment into a Google cloud, they're going to feel this vacuum because they no longer have the programs they're familiar with. It represents a huge investment in time that people aren't going to be receptive to. And you have Microsoft saying ‘for just $3 a month more you could have all these great programs you're used to. Now they've got the pricing so you get more than you get on Google, what Microsoft is offering is fantastic, and for $3 more it's a premium worth paying. Microsoft is still the king of hill for a reason."
The cloud aspect of Google Apps hadn't proved important to the startup (and it wasn't why they switched to Office 365). "Everybody was fine with the idea of the cloud but it wasn't the primary reason; the cloud was nice to have but they didn't necessarily see it as a productivity boost." In fact, more employees were concerned about working offline. "What happens if there's no Internet, if I'm in a plane with no Wi-Fi, can I still work? Their first reaction is ‘I want Office for that'."
His current company has used Office 365 from the start ("I brought up Google apps but nobody was willing to be that cheap about $3 a user," he notes) and OneDrive is one of the most popular features "People like it; it's taken over from sneakernet and emailing back and forth. If they need to work together, people just toss it up on OneDrive".
Outlook and Excel features come up again and again as advantages for the companies who had made the move away from Google Apps. Erik Jewett of Skykick, who provides a service partners use to migrate customers to Office 365, hears that particularly from power users. "In Excel, there are rich capabilities that aren't matched by Google apps." In Outlook, calendar sharing is important, as is delegation. "Administrative assistants can manage their manager's calendar; they don't have that type of delegation with Google apps."
Nick Espinosa, the CIO at IT consultancy BSSSi2, has helped several businesses move from Google Apps to Office 365. "Quite frankly, Google is completely outclassed by Office 365 in this arena and despite the price difference corporations who made the switch to Google Apps to save money usually end up coming back within a year. The primary driver of this appears to be Outlook integration over everything else, followed by the inability to do some advanced things that Microsoft Office excels at."
For larger companies, this goes beyond the familiarity of Outlook into advanced features. "You can integrate Skype into Outlook, you can integrate OneDrive for Business into Outlook. It becomes essentially like a command center, and there is nothing Google gives you that does that."
"The reason people have been moving to Google is cost," Espinosa says. "Most companies we've seen that have decided to move to Google, it was primarily for cost savings. The say ‘we get email, we have all these things and it's significantly less expensive than having to buy a copy of Office for everyone and hook up a mail server. But a lot of people don't find the usability and collaboration nearly as effective as Office 365."