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Microsoft-Google Battle Heats Up

New developments -- Microsoft's search deal with Yahoo! and Google's planned introduction of an OS -- are ratcheting up competition for IT dollars between the two rivals.

The summer of 2009 was cooler than normal in many parts of the United States, but Microsoft's competition with Google Inc. did nothing but heat up over the last few months. The companies are locking horns as they never have before -- and competing for big slices of enterprise IT budgets.

Opening Shots
Google fired a significant salvo in early July by revealing that it was developing an OS designed to ultimately tread on Windows' sacred market-share ground. The Chrome OS will be an extension of Google's Chrome Web browser, which was introduced last year and is chipping slowly away at the Microsoft Internet Explorer market share. Google is basing the open source Chrome OS on the Linux kernel and claims that its user interface will be fast, unobtrusive and built on an underlying architecture that's resistant to viruses.

The primary target for the Chrome OS is the netbook. Most netbooks now use the inexpensive Windows XP Home, which has resulted in lower Windows profit margins for Microsoft in recent quarters. Although they're yet to make a significant impact in the enterprise, netbooks are a popular consumer computing option. In December, IT research firm International Data Corp. predicted that 21.5 million netbooks would be sold this year, up from 11.4 million units last year.

While it's unlikely that Chrome OS will challenge Windows' market-share dominance, especially in IT shops, it could usher in an era of lighter, Web-based, low-resource OSes. For its part, after having largely failed to sell enterprises on resource-hog Windows Vista, Microsoft is promising that Windows 7 will work better than Vista on machines with slower processors and less memory -- a claim beta testers have clearly borne out.

Return Fire
Closer to Google's dominant field, Microsoft in late July announced a 10-year search deal with Yahoo! Inc., where Yahoo! will use Microsoft's new Bing search engine and will effectively become Microsoft's search sales force. The deal is subject to regulatory approval and will likely not be finalized until early 2010.

The Microsoft-Yahoo! venture is an obvious shot at denting Google's dominance in search. Google handles about 70 percent of search traffic on the Web, and maybe more, according to some estimates. But with Microsoft and Yahoo! both trailing Google badly in search -- and the companies needing to integrate some operations -- it's unlikely that the duo will catch Google anytime soon.

"Google has a huge lead -- not just in market share but also in search technology -- over both Yahoo! and Microsoft," writes search analyst Danny Sullivan, editor in chief of Search Engine Land, on his publication's Web site.

Office vs. Apps
One of the most heated battles for IT dollars is likely to take place between Microsoft Office and Web-based upstart Google Apps. In August, Google began an advertising campaign for Google Apps, a rarity for the company. However, it's hard to imagine companies worldwide ripping out the familiar Microsoft suite and replacing it with a system that has far less functionality. Still, advertising is a big step for Google and sends a signal that the company is serious about reaching IT managers who may be rethinking their software budgets.

Microsoft isn't standing pat, though. In late July, Redmond columnist Mary Jo Foley reported in her ZDNet "All About Microsoft" blog that Microsoft is testing a streaming-download version of Office. Office 2010 Click-to-Run, as Microsoft is calling the technical preview program, would stream Office apps to PCs for installation and let users work with them before they're fully installed.

About the Author

Lee Pender is the executive features editor of Redmond magazine. You can reach him at lpender@redmondmag.com or follow him on Twitter.

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