Google Inc. entered a new business Thursday that has nothing to do with advertising on the Web. The world's No. 1 search company began selling a package of business software in a direct challenge to Microsoft Corp.
Google is charging $50 (U.S.) a year, per user, for its new suite of software, which includes web-based word processing and spreadsheets. The product, Google Apps Premier Edition, is an enhancement of an earlier, free offering already in use by more than 100,000 small businesses and universities.
Customers testing the new product include General Electric Co. and Procter & Gamble Co. For the annual fee, users receive telephone support, a reliability guarantee and realms of online storage space.
The software package builds on the launch last summer by Google of a free software suite that includes an e-mail service, web calendar, instant messaging, a customizable home page and the ability to make Internet phone calls. The latest package is also available without charge in a version that comes loaded with advertisements.
The launch comes as Microsoft is spending about $450-million to persuade businesses to buy the latest version of its Office software, rolled out recently with the company's new Vista operating system.
Google's push into the business software space is also a challenge to other players, including IBM Corp. and its Lotus suite of business software. But with some 450 million people around the world using a version of Office software today, analysts say Google is unlikely to overturn the status quo immediately.
"The real impact of what Google is trying to do probably won't be evident for another five years," said Jim Murphy, an analyst with AMR Research in Boston.
It's hard to know how much Google is undercutting Microsoft on price because businesses usually negotiate discounts based on the number of licences they buy. But Merrill Lynch analyst Kash Rangan estimates that the average corporate cost for Office amounts to about $60 to $120 annually per user, assuming the software is used over a two or three-year cycle.
Price is not the only factor for companies buying these products. They also look for reliability and quality technical support.
Google has been pumping billions of dollars of its advertising profits into building massive sites of server computers that will be used to support the company's new web-based services.
Executives at the Mountain View, Calif.-based company insist they are not trying to take out Microsoft and other incumbents. Rather, they say Google aims to change the way people use software, making it a collaborative tool that multiple users can simultaneously connect to over the Internet.
"Businesses are looking for applications that are simple and intuitive for employees, but also offer the security, reliability and manageability their organizations require," Dave Girouard, vice president of Google's business software unit, said in a press release. "With Google Apps, our customers can tap into an unprecedented stream of technology and innovation at a fraction of the cost of traditional installed solutions."
With files from Associated Press
