Google, Chrome, and Time as Justice

June 1, 2011

The trade press, the blogosphere, and pundits shifted into overdrive in May 2011. Google used its Google I/O Conference to launch an attack on Microsoft’s golden goose, Redmond’s enterprise revenue.

In what was a brilliant public relations move or dumb luck, Microsoft muted the Google I/O media coverage with its stunning announcement. Microsoft ponied up $8.5 billion for Skype’s ageing peer-to-peer, debt-ridden voice over Internet protocol. The money was the story but a few pointed out that Skype was a Linux and open source system, not a Windows-centric system. Microsoft ignored the technical plumbing in its discussions of the deal. Skype will become a separate division which is akin to buying an expensive trailer and putting it in the garden of an English country manor.

Google’s timing of its announcement of a monthly rental plan for a no-hassle notebook computer was presumably decided upon months ago. The suppliers had to be lined up. The Chrome operating system tailored to deliver on the 'no hassle' promise. The assembly lines flipped on so that the thousands of Google I/O faithful would receive a 'free' Chrome OS-based notebook. (A useful summary of the product appears at http://www.technewsworld.com/story/72436.html?wlc=1305202551) The Chromebook was not a last-minute idea.

Google, despite its best efforts, fell victim to another ill-timed event. Coincident with the hoopla of the Google I/O event, Google’s Web log service crashed. According to Ed Bott (http://www.zdnet.com/blog/bott/googles-blogger-outage-makes-the-case-against-a-cloud-only-strategy/3300), in May Google rolled out a maintenance release for its Blogger service. Something went terribly wrong, and its Blogger customers have been locked out of their accounts for more than a day. Google’s engineers have been frantically working to restore service ever since, although they haven’t shared any details about the problem.

Bott pointedly noted “Google’s Blogger outage makes the case against a cloud-only strategy.” Google seems to be plagued with unfortunate circumstances. Coincidence? Bad karma? Has Google offended the data gods?

That’s what makes the timing of Google cloud play announcement interesting. Before looking at the choice of May 10-11, 2011 as the roll out dates, why is a notebook computer that does not require the user to install software, fiddle with control panels, and worry about backing up important data a challenge to Microsoft?

In my recent work, my team and I uncovered three reasons why Google’s Chromebook is one of Google’s most aggressive actions with regard to Microsoft. The first reason which surfaced in a recent study of user satisfaction with enterprise applications in general and search in particular is that users are dissatisfied with the status quo. The reasons gleaned from interviews included reliability. The idea was that Windows-based computers behaved in ways that got in the way of some work. To solve a problem, a user had to involve information technology.

One interview subject said: “I felt like the IT kid blamed me for the crash.” Another issue was summed up in this comment: “The software doesn’t work like Google or the applications on my iPad at home.” The third most common statement was: “I need a faster machine but the company has not upgraded my computer for several years. My personal notebook is what I use for some work.” Google, therefore, is focusing on user satisfaction, worker ego, and costs.

Microsoft does not provide much if any hard data about the cost of its software licenses or the secondary and tertiary expenses an organization incurs when using Windows, SharePoint, SQL Server, or Exchange. Some consulting firms have tried to quantify these costs, but the numbers are like most 'pay to play' advisory services. A better source of information is balance sheet data that make clear that companies are struggling to contain costs. In an effort to hold down the costs of information technology, commercial enterprises and government agencies have embraced outsourcing, cloud computing, open source software, performing RIFs (reductions in force), no cash mergers, and other cartwheels. Most of these techniques work but one cost continues to defy tight control: information technology.

That is the carotid artery Google’s surgical strike is intended to pierce. The financial pressure at most organizations is building. If Google’s sharp-piece of chrome slices that revenue conduit, Microsoft could suffer a debilitating if not fatal injury.

What could go wrong? The odds seem to favor Google. The company is thriving. Its revenue continues to grow. The firm’s cash reserve, while not as beefy as Apple’s, is tallied in the billions of dollars. The company has one of the most valuable and highly regarded brands, again second only to Apple’s. The Google product and service line continues to grow, spanning consumer television to corporate email archiving, from mobile phones to online music.

Microsoft looks more and more like a late-stage technology company. The firm has a number of business units that consume cash instead of generating revenue. The Microsoft Internet business remains a laggard. The tie up with Yahoo has done little to reverse the steady increase in Google’s online search and advertising market share which is over 65 per cent in the US and even higher in the UK, Germany, and Denmark if the third-party metrics are accurate.

Google, on the other hand, seems to have the well-toned muscle of a professional athlete at the high point of her career. After a management change in the spring of 2011, Google has shown more aggressiveness in certain high-potential markets like rich media, mobile services, and the enterprise. The company’s legal troubles, although daunting, have not inhibited the company’s scope of action. Along with the announcement of the Chromebook, Google outlined plans for hooking one’s home to the Google infrastructure. A person using an Android mobile phone could turn on the lights and activate the microwave.

My view is that the timing of this announcement may be one of the challenges Google faces.

First, Google has not been able to work out the technical glitches in its multiple operating systems. Google uses one operating system for its search and online advertising service. The company has the Android operating system, which is available in a number of different versions, for mobile devices. Google also has the Chrome operating system which uses some code from Android but seems to have functionality not offered in Android. In videos streamed from Google I/O, the incompatibilities, inconsistencies in Android and Chrome were voiced by developers. One person said: “Look I have the sound synchronized in my iPhone app. When will the voice and video be synchronized in Android?” The Googler responded, “That’s a difficult technical problem.” In a second exchange, a developer queries: “When will I be able to issue a discount and have the discount applied to a customer’s purchase of an app in the Android store front?” The answer was: “We’ll have to look into that.” The expression on the Googler’s face suggested to me that Google had not considered that function which is available to Apple mobile developers. My view: Google may have rushed its announcement, leaving some technical lumber to be tidied.

Second, Google has recently experienced several brushes with authorities not widely reported in the North American media. One example is the police action in South Korea. In case you missed this story, Reuters reported the raid in South Korea Police Probe Google over Location Data Collection.” (See http://www.reuters.com/article/2011/05/03/uk-google-korea-idUSLNE74202420110503). A second issue is the Congressional investigation by US officials into privacy related to location tracking. As I write this, the hearings are underway, but the issue of tracking a user’s whereabouts, storing those data, and then using those data in various ways is not yet put to rest. A third issue is the probe into Google’s business practices by European Commission authorities. The legal processes are not yet fully engaged so the matter is unresolved. Any one of these issues is significant, but if these investigations exhibit synchronicity, Google could face amplified consequences from these matters. The issue at the root of these legal battles is privacy, the use of certain personal data, and the disclosure of the fact of monitoring, tracking, and surveillance without the knowledge of governmental authorities and users.

Third, cloud computing as a concept has been getting more attention. I ran a query on Google Trends comparing the concepts “cloud computing” and “outsourcing”. From the Google-generated output, outsourcing has been in decline as a concept measured by Google searches and cloud computing has been creeping upwards. What is striking is that cloud computing has not caught fire like the buzzword 'backup'. Perhaps more interesting is the recent Amazon cloud thunderstorm. A fortnight before the Google I/O Conference, Amazon’s cloud system failed. After several days of silence, hard details emerged that a procedural error occurred. Amazon’s response suggested that customers were partially responsible for data loss. High profile services like Condé Nast’s community news site Reddit.com and the venture-backed Quora.com were knocked off line for a time and full service required days to restore. Google, of course, has a different approach to its cloud services, but the Amazon implosion and the subsequent media hail storm did little to boost my confidence in a cloud-only solution for my business information.

To recap: Google’s roll out of the Chromebook and its direct effort to impair Microsoft’s cash cow took place in the center of three unrelated, uncontrollable events. First, Google’s own technical team has not ironed out engineering issues associated with the Chromebook and attendant mobile components. Second, legal investigations pivot on Google’s actions related to personal and organizational privacy. Third, cloud computing itself has emerged as a solution that carries some potential risks.

Google cannot unwind the Chromebook and the tactical steps it took at the Google I/O Conference. We are now a spectator to a series of actions that will make or break Google, Microsoft, and maybe cloud computing.

What can Google do to make its assault on Microsoft payoff? In my experience, Google can now do little to shape the next series of actions. Google will have to deliver, despite the technical limitations of the Chrome operating system, the legal hassles, and the fallout from the Amazon cloud failure. Google will have to wait, see what Microsoft and customers do, and then respond. Google will have less control over the next round of actions. Price is not an issue because at $20 a month or a couple of hundred dollars for the device, Google is entering Wal-Mart and Tesco pricing territory. Will Google’s new management line up have the reflexes to deal with the consequent events? We will know by the end of 2011, if not before.

Does Microsoft have the chops to cope with the Google assault? Based on Microsoft’s handling of other business challenges, I think Microsoft is at a disadvantage. The company has not made headway in online, search, or rich media. The Kinect, a smart controller for the Xbox, was acquired after Apple allegedly rejected overtures from Canesta, the manufacturer of semiconductor chips capable of sensing movements and gestures à la the film Minority Report. Microsoft will have to apply similar management acumen to the Skype acquisition, which is a much higher stakes play. Google may further disrupt Microsoft’s synapses so that Google does not really 'win' the enterprise battle with the flagship Chromebook. Microsoft just does not focus and defaults as a result of disarray.

What about organizations? Will Microsoft customers give up the mainstays of corporate activity? Will marketers abandon PowerPoint? Will CEOs shift from Word to Google Docs? Will the green eyeshade crowd abandon their MBA-blessed macros to plug numbers into a cloud-based spreadsheet? Will government contractors put out news releases touting the cloud award contracts for classified work to companies with sensitive information residing in the Google cloud?

I concede that the economics of a Chromebook put Microsoft at a disadvantage. I concede that Microsoft has a number of built in challenges that make it vulnerable. I concede that the cloud computing technology will grow in reliability, value, and importance over the next three to five years.

When I step back, Google has to deal with the unfortunate timing of its slash at Microsoft’s jugular. But the larger issue boils down to risk. Sony Corp. continues to fight its loss of customer data for several weeks undermines confidence in this next big thing, cloud computing. Microsoft itself had to apologize for its online glitches and massive email delays that took place as it announced its Skype deal and Google was praising the virtues of cloud computing. (See GeekWire’s Microsoft Apologizes for Online Services Glitches, Massive Email Delays,” May 12, 2011, http://www.geekwire.com/2011/microsoft-apologizes-online-services-glitches-massive-email-delays).

Is the data in the Google cloud secure? Is the level of trust between Google and a Fortune 50 company sufficiently high to warrant a significant shift from on premises and more traditional time sharing services warranted? Is the Google-centric reliability of the infrastructure throughout the chain of providers, telecommunication companies, hardware vendors, software developers, and other intermediaries?

The big question for me is trust. The timing of the Chromebook comes at a time when Google has had its corporate vehicle’s chrome bumpers dented. There have been collisions with record companies, book publishers, US state and Federal entities, legal authorities on every continent except Antarctica, and just bad public relations. Google has had to pay astronomical sums to keep technical talent from jumping to companies like Facebook. Google has publicized its diversification into alternative energy and commercial real estate. Google has found itself trailing Apple both in value and in global brand power, according to Millward Brown, authors of the BrandZ report. (See http://www.mediabistro.com/prnewser/apple-charges-ahead-of-google-on-brand-ranking-chart_b20533).

Like I said - timing. What was that comment in As You Like It? “Time is the justice that examines all offenders.”

Mr Arnold is a consultant. More information about his practice is available at www.arnoldit.com and in his web log at www.arnoldit.com/wordpress.