Google Gets Ready to Rumble With Microsoft




By STEVE LOHR and MIGUEL HELFT






Mountain View, Calif.
A CEREBRAL computer-scientist-turned-executive, Eric E. Schmidt has spent much of his career competing uphill against Microsoft, quietly watching it outflank, outmaneuver or simply outgun most of its rivals.
At Sun Microsystems, where he was chief technology officer, Mr. Schmidt looked on as Scott G. McNealy, the company’s chairman, railed against Microsoft and its leaders, Steven A. Ballmer and Bill Gates, as “Ballmer and Butthead.” During a four-year stint as chief executive of Novell,
Mr. Schmidt routinely opined that it was folly for any Microsoft rival
to “moon the giant,” as he put it; all that would do, he argued, was
incite Microsoft’s wrath.
Then, six years ago, Mr. Schmidt snared the C.E.O. spot at Google
and today finds himself at the helm of one of computing’s most
inventive and formidable players, the runaway leader in Internet search
and online advertising. With its ample resources and eye for new
markets, Google has begun offering online products that strike at the
core of Microsoft’s financial might: popular computing tools like word
processing applications and spreadsheets.
The growing confrontation between Google and Microsoft promises to
be an epic business battle. It is likely to shape the prosperity and
progress of both companies, and also inform how consumers and
corporations work, shop, communicate and go about their digital lives.
Google sees all of this happening on remote servers in faraway data
centers, accessible over the Web by an array of wired and wireless
devices — a setup known as cloud computing. Microsoft sees a Web future
as well, but one whose center of gravity remains firmly tethered to its
desktop PC software. Therein lies the conflict.
But in a lengthy interview at Google’s campus here, Mr. Schmidt, 52,
follows past practices. He soft-pedals. As he coyly describes a move
that most of the industry views as Google’s assault on Microsoft, he
does his best to say that it is something entirely other than that.
No, he says, there was no thought of a Microsoft takedown when,
earlier this year, Google introduced a package of online software
offerings, called Google Apps, that includes e-mail, instant messaging,
calendars, word processing and spreadsheets. They are simpler versions
of the pricey programs that make up Microsoft’s lucrative Office
business, and Google is offering them free to consumers.
Still, Google Apps aren’t anything other than a natural step in
Google’s march to deliver more computing capability to users over the
Internet, Mr. Schmidt says.
“For most people,” he says, “computers are complex and unreliable,”
given to crashing and afflicted with viruses. If Google can deliver
computing services over the Web, then “it will be a real improvement in
people’s lives,” he says.
To explain, Mr. Schmidt steps up to a white board. He draws a
rectangle and rattles off a list of things that can be done in the
Web-based cloud, and he notes that this list is expanding as Internet
connection speeds become faster and Internet software improves. In a
sliver of the rectangle, about 10 percent, he marks off what can’t be
done in the cloud, like high-end graphics processing. So, in Google’s
thinking, will 90 percent of computing eventually reside in the cloud?
“In our view, yes,” Mr. Schmidt says. “It’s a 90-10 thing.” Inside
the cloud resides “almost everything you do in a company, almost
everything a knowledge worker does.”
Mr. Schmidt clearly believes that the arcs of technology and history
are in Google’s corner, no matter how hard he tries to avoid mooning
the giant. Microsoft, of course, isn’t planning to merely stand still.
It has spent billions trying to catch Google in search and Web
advertising, so far without success. And the companies are also
fighting it out in promising new fields as varied as Web maps, online
video and cellphone software.
“The fundamental Google model is to try to change all the rules of
the software world,” says David B. Yoffie, a professor at the Harvard
Business School. If Google succeeds, Mr. Yoffie says, “a lot of the
value that Microsoft provides today is potentially obsolete.”
At Microsoft, Mr. Schmidt’s remarks are fighting words. Traditional
software installed on personal computers is where Microsoft makes its
living, and its executives see the prospect of 90 percent of computing
tasks migrating to the Web-based cloud as a fantasy.
“It’s, of course, totally inaccurate compared with where the market
is today and where the market is headed,” says Jeff Raikes, president
of Microsoft’s business division, which includes the Office products.
TO Mr. Raikes, the company’s third-longest-serving executive, after
Mr. Gates and Mr. Ballmer, the Google challenge is an attack on
Microsoft that is both misguided and arrogant. “The focus is on
competitive self-interest; it’s on trying to undermine Microsoft,
rather than what customers want to do,” he says.
Microsoft, Mr. Raikes notes, has spent years and billions of dollars
in product development and customer research, studying in minute detail
how individual workers and companies use software. What they want, he
says, is the desktop programs and features of Microsoft Office, and the
proof is in the marketplace. “I mean, we have more than 500 million
people who are using Microsoft Office tools,” he says.
Indeed, Microsoft is the wealthy incumbent with a huge lead in the
market for personal productivity software, with a share of more than 90
percent. But the Google challenge, industry analysts say, is not so
much a head-to-head confrontation with Microsoft in its desktop
stronghold as it is a long-term shift toward Web software, which
operates with different principles and economics.
Analysts note that Google is a different competitor from others
Microsoft has dispatched in recent years: it is bigger, faster-growing,
loaded with cash and a magnet for talent. And the technology of the
Google cloud opens doors. Its vast data centers are designed by Google
engineers for efficiency, speed and low cost, giving the company an
edge in computing firepower and allowing it to add offerings
inexpensively.
“Once you have those data centers, you want to go out and develop
complementary products and services,” says Hal R. Varian, a former
professor at the University of California, Berkeley, who is Google’s
chief economist. They can be offered free or at minimal cost to users,
he says, because they bring more traffic to Google, generating more
search and ad revenue.
Google, it seems, has a promising opening against Microsoft. But
tilting at a giant and taking down a giant are very different things.
Microsoft, of course, isn’t standing still. Just as it squelched the
first Internet challenge in the 1990s by linking Web browsing software
to its mainstay products, it is now adopting a similar strategy for
cloud computing by adding Internet features to its offerings. It is
moving cautiously on this front, however, to avoid eroding the
profitability of its desktop franchise.
More than any other Google foray, providing Web-based software to
workers for communication, collaboration and documents promises to be
the acid test of how far Google can go beyond Internet search. Will two
of its formulas — its distinctive, hurry-up model of building products
and services, and its rapid-fire approach to recruiting and innovation
— succeed in new arenas?
Google’s quicksilver corporate culture can be jarring for some
employees, even for Mr. Schmidt. He recalls that shortly after joining
the company and its young founders, Sergey Brin and Larry Page, he was frustrated that people were answering e-mail on their laptops at meetings while he was speaking.
“I’ve given up” trying to change such behavior, he says. “They have to answer their e-mail. Velocity matters.”
VELOCITY does, indeed, matter, and Google deploys it to great
effect. Conventional software is typically built, tested and shipped in
two- or three-year product cycles. Inside Google, Mr. Schmidt says,
there are no two-year plans. Its product road maps look ahead only four
or five months at most. And, Mr. Schmidt says, the only plans “anybody
believes in go through the end of this quarter.”
Google maintains that pace courtesy of the cloud. With a vast
majority of its products Web-based, it doesn’t wait to ship discs or
load programs onto personal computers. Inside the company, late stages
of product development are sometimes punctuated by 24-to-48-hour
marathon programming sessions known as “hack-a-thons.” The company
sometimes invites outside engineers to these sessions to encourage
independent software developers to use Google technologies as platforms
for their own products.
New features and improvements are made and tested on Google’s
computers and constantly sprinkled into the services users tap into
online. In the last two months alone, eight new features or
improvements have been added to Google’s e-mail system, Gmail,
including a tweak to improve the processing speed and code to simplify
the handling of e-mail on mobile phones. A similar number of
enhancements have been made in the last two months to Google’s online
spreadsheet, word processing and presentation software.
Early this month, Google released new cellphone software, with the
code-name Grand Prix. A project that took just six weeks to complete,
Grand Prix allows for fast and easy access to Google services like
search, Gmail and calendars through a stripped-down mobile phone
browser. (For now, it is tailored for iPhone browsers, but the plan is to make it work on other mobile browsers as well.)
Grand Prix was born when a Google engineer, tinkering on his own one
weekend, came up with prototype code and e-mailed it to Vic Gundotra, a
Google executive who oversees mobile products. Mr. Gundotra then showed
the prototype to Mr. Schmidt, who in turn mentioned it to Mr. Brin. In
about an hour, Mr. Brin came to look at the prototype.
“Sergey was really supportive,” recalls Mr. Gundotra, saying that
Mr. Brin was most intrigued by the “engineering tricks” employed. After
that, Mr. Gundotra posted a message on Google’s internal network,
asking employees who owned iPhones to test the prototype. Such peer
review is common at Google, which has an engineering culture in which a
favorite mantra is “nothing speaks louder than code.”
As co-workers dug in, testing Grand Prix’s performance speed, memory
use and other features, “the feedback started pouring in,” Mr. Gundotra
recalls. The comments amounted to a thumbs-up, and after a few weeks of
fine-tuning and fixing bugs, Grand Prix was released. In the brief
development, there were no formal product reviews or formal approval
processes.
Mr. Gundotra joined Google in July, after 15 years at Microsoft. He
says that he always considered Microsoft to be the epicenter of
technological development, but that the rise of cloud computing forced
him to reconsider.
“It became obvious that Google was the place where I could have the
biggest impact,” he says. “For guys like me, who have a love affair
with software, being able to ship a product in weeks — that’s an
irresistible draw.”
Another draw is Google’s embrace of experimentation and open-ended
job assignments. Recent college graduates are routinely offered jobs at
Google without being told what they will be doing. The company does
this partly to keep corporate secrets locked up, but often it also
doesn’t know what new hires will be doing.
Christophe Bisciglia, a 27-year-old engineer, qualifies as a
seasoned veteran at Google, having worked there for four years. Mr.
Bisciglia has done a lot of college recruiting in the last two years
and has interviewed more than 100 candidates.
“We look for smart generalists, who we can be confident can fulfill
any need we have,” he explains. “We hire someone, and who knows what
need we’ll have when that person shows up six months later? We move so
fast.”