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Google Apps to challenge Microsoft's enterprise business

Despite Microsoft's recent efforts to counter Google's portfolio of cloud-based productivity applications, the search giant continues to gain traction with business customers who once wouldn't dream of running anything but hosted email and on-premise software like Microsoft's Outlook and Office products.

In a Christmas Day report on the state of cloud-based productivity services, the New York Times notes that in 2012, Google Apps landed such prominent new customers as Swiss drug manufacturer Hoffmann-La Roche and the US Interior Department, each with between 80,000 and 90,000 staffers now using Google's suite of online word processing, collaboration, email, messaging, video conferencing, and backup tools.

The Times piece concedes that Google is "tight-lipped about how many people use Google Apps" but did report in June that an additional million businesses had joined up since late 2011, bringing the number of businesses using the cloud service from four million to five million.

Even assuming that this client base grew further in the second half of 2012, the newspaper notes that most Google Apps customers are very small businesses. The big enterprise is still Microsoft's for all intents and purposes.

What's more, Microsoft last year launched Office 365 to confront the small-but-growing dent Google's cloud services were putting into its Office installed base. But Office 365, which costs more on a monthly basis than Google Apps and doesn't include email, and has yet to win "many converts from Google," according to the Times.

A few years ago, when the search giant introduced Google Apps as a paid monthly service combining key products like Gmail and Google Docs, most people familiar with enterprise-class IT were sceptical that larger companies and organisations would opt to cede layers of control over security, backup, and functionality over core business applications to a cloud-based service.

But early converts like Genentech, which moved some 14,000 employees over to Gmail and Google Apps, helped push the dial towards acceptance of such a radical shift in productivity software provisioning, particularly in public sector organisations.

Now Gartner calls Google "the only strong competitor" Microsoft faces in the arena, as noted by the Times.

Will Google's ascent in productivity software continue in 2013? The newspaper guessed that the company's apparent disinterest in serving up the kind of locked-down, enterprise-class service that Microsoft provides with Office and other high-end products means Google's ambitions are still fairly low-key. In recent months, Microsoft has also beefed up Office 365's integration with other cloud-based services like storage and backup and has its new Office 2013 software ready to ship.

The key factor here could continue to be price. Google Apps still cost just $50 (£30) a year per user, just as the service did at the start. Office 365 is priced at $72 (£45) a year per user at the entry level, with higher yearly fees for expanded versions of the service. And licenses for Office 2013 will be more expensive than Office 2010.

For smaller businesses and organisations, the simplicity of Google's pricing structure versus Microsoft's complex and frequently shifting tiered approach is another point in the search giant's favour, according to the Times. That could continue to pay off for Google Apps in the new year with additional conversions among the SMB set and even some more prominent poachings of larger businesses as well, experts cited by the newspaper said.