Google Takes Another Shot at Microsoft Office

Until recently, the GPS navigation business was growing quickly and posting strong profits. But with several acquisitions and major investments, Google (GOOG) has disrupted the space by making this technology free. Ultimately, the search giant plans to make money through its advertising machine.

And it looks like Google wants to disrupt other markets. Just look at the company's recent acquisition of Picnik. Founded in 2006, the company provides easy to use Web-based photo editing. Might this be a shot at Adobe's (ADBE) dominant position? Perhaps.

But there's another deal that may be even bigger: this week, Google acquired DocVerse, which develops collaboration software for Microsoft (MSFT) Office products. While the price tag was not disclosed, the rumor is that it was around $25-$30 million. But the impact on Office could be many times greater.

A look at DocVerse

At Microsoft, Shan Sinha and Alex DeNeui worked on product strategy for key offerings like SharePoint and SQL Server. They saw lots of opportunities to put these products into the cloud, leveraging the Internet for storage, processing and easy access. But there was resistance.

So in 2007, Sinha and DeNeui left to start DocVerse and raised $1.5 million. They wanted to use the cloud to solve a pervasive problem: for people to collaborate with Office products, they had to email documents or use expensive software like SharePoint.

But DocVerse was an easier and cheaper alternative. A user can download a plug-in and install it on Office. An icon will appear on the edge of the screen and allow people to easily edit and view documents. All versions of the documents are stored in the cloud, making it easier to manage projects.

It was a smart strategy. After all, Office has more than 600 million users and it would be unrealistic to expect people to move away from this platform.

However, DocVerse is kind of like a Trojan horse. In other words, it's a round-about-way to get users to experience cloud and understand the benefits.

Interestingly enough, Google has already been using the Trojan-horse strategy. For example, the company has Google Apps Sync for Microsoft Outlook. There is also another feature that allows the upload of any type of file into the cloud using Google Docs.

Deep impact

Unlike its impact on the GPS navigation business, Google's attack on Office is likely to be much tougher and slower. The fact remains that Microsoft has long-standing customer relationships across the globe, a network of consultants and integrators, and a strong customer support system. Besides, Microsoft is already making moves to the cloud, such as with June's launch of Office 2010. There will be a free Web-based version (of course, the functionality will be limited).

But there are problems. First of all, the infrastructure costs for cloud-computing are higher than traditional software. This could lessen the margins on Office, which are a staggering 64%. Also, as Google gets more traction, there will likely be downward pressure on pricing.

The stakes are certainly high, since Office is Microsoft's largest business -- accounting for $12 billion in profits. But based on the continued efforts of Google, it looks like this business will undergo a gradual disruption.