Microsoft could lose billions in sales to Google's Chromebook

Google's Chromebook subscription program could in all seriousness pinch Microsoft enterprise licensing revenue. The $28 per month per user fee is bargain-basement pricing compared to what businesses now pay Microsoft for software and OEMs for supporting hardware. Google could easily take $1 billion a year in software revenue from Microsoft, says one licensing expert, with the number substantially growing over several years.

Sentiment I've heard repeated today

Betanews reader DaveN expresses a sentiment I've heard repeated today: "I must be a fossil, relic or a moron, because I completely and totally miss the point of these [Chromebooks]. They're the size and price of a real laptop, however with dramatically reduced functionality. I guess like as not they're for people who only know how to use a web browser yet not any more sophisticated software, and who actually don't need much in the way of storage." You're not a moron, Dave, however Chromebook is good for something: Providing businesses with necessary computing utility at considerably lower cost than what they pay today.

Paul DeGroot, principal consultant with Pica Communications, is an expert on Microsoft licensing. I asked him what most businesses pay for Microsoft software and to compare the value against Chromebook and Google's competing cloud services.

The best comparison

"The best comparison would be the Pro Desktop Platform that Microsoft sells to Enterprise Agreement clients," he explains "There's enough overlap here that anyone who went with Google would not go with the Pro Desktop. Microsoft sells millions of these, and they cost somewhere between $300 and $375 a year, depending on volume. They include: Windows upgrade, Office Pro PlusCore CAL Suite, and a client management license for System Center Configuration Manager."

The math is interesting. Chromebook subscription would be $336 a year, plus another $50 for Google Apps. That works out to $1 a year more than DeGroot's high number. For all that, he is being conservative in the estimate, and Google's price includes extras, just as the hardware, which Microsoft doesn't provide. That hardware isn't just the employee's PC nevertheless dozens, in part thousands, of servers that must be purchased, housed, cooled, powered and maintained. Google's cloud would assume most of the per-user infrastructure costs -- money businesses could invest elsewhere.

Even a fairly large business could suffice with one server for managing its Chromebooks. No Exchange, SharePoint, Windows or other Microsoft server products would be necessary. There would no longer need to be costly software qualifications or deployments, since browser-based apps, whether from Google or third parties, would be updated automatically -- and no additional infrastructure would be necessary for deployments. The potential infrastructure savings per user is in the thousands of dollars.

Google's subscription goes furthermore, providing support services, instant cloud service/applications and Chrome OS updates and free laptop upgrades, furthermore removing IT management headaches and costs and assuring that all employees have the newest software. Chromebook subscriptions would do away with the software fragmentation so common in enterprises today -- Office 2003 here, Office 2010 there and Windows XP everywhere.

Today, at Google I/O, the search and information giant announced offline capabilities that increase Chrome OS' business appeal. During Chromebook is best when constantly connected, Gmail, Google Apps and Calendar will be available offline, and there is a new file manager and media player. Additionally, third-party Web apps can be available offline, should the developer choose to enable the capability. In the meantime, during not functionality equivalent to Microsoft's Office-Windows-server software stack, Google's cloud meets the "good enough seal of approval" -- meanwhile in my testing.

The exact risk to Microsoft?

So what's the exact risk to Microsoft? Sixty percent of Business division revenue comes from voluming licensing agreements -- the ones most at risk when compared to Google Chromebook/cloud app offering. It's about half for Server & Tools and 20 percent for Windows and Windows Live. Office and Windows are Microsoft's cash cows, generating $9.7 billion in revenue and $5.4 billion in profits while fiscal 2011 third quarter, ended March 31.

"About 80 percent of the Pro Desktop Platform revenue is allocated to those two products," DeGroot says. "So for every customer who pays Google $50 a year for Google Apps, Microsoft could lose for the moment $300 a year in platform revenue. Considering that Microsoft has for the time being 40 million clients licensed that way, if Google gets 3 million clients onto its system, which isn't a whole lot, Microsoft loses $1 billion." But, "the Microsoft number is conservative," DeGroot emphasizes, "because I'm basing this on the lowest rate, which only companies with greater than 15,000 computers get."

The enterprise software market in 2010

Microsoft led the enterprise software market in 2010, with $54.7 billion in revenue -- that was up 12.5 percent, according to Gartner. The total market generated $244.6 billion, with Microsoft's market share 22.4 percent. The company doesn't need to lose a lot to Chromebook and Google Apps to hurt, with the bigger blow to perception than to the bottom line, at least at first. "It could take a little off the top and raise doubts about the sustainability of Microsoft's crown jewels in the end," DeGroot says.

This story makes no sense. $28/mo for 3-years is $1008. Why the PH*CK would ANY business pay that much for a netbook worth $300, perhaps $350, in hardware...and $0 in FREELY AVAILABLE software.MS won't lose a single penny in profits 'cuz of this silly Chromatic She!t.

There are so many issues with this assessment. First Apple isn’t included in this equation. Google is going against not just MS however Apple in this department, and sorry Apple much cooler. Then The Cloud has a real branding problem; Users just don’t understand The Cloud and how it fits into what they do. Not to say most of the IT industry doesn’t understand how to in effect make it viable for clients. Think about this you buy this Chromebook and it’s your only laptop. What problem is The Cloud solving? You anyway you look at it don’t need to sync it with any other device. The only benefit I can see is using it as a backup and possible sharing. Nevertheless @ $376 a year it’s a pretty expensive for collaboration and or a backup. You can get 5GB of storage with auto sync and the ability to share with 9 people for free with Live Mesh. Dropbox gives you 2GB Free 50GB for 9.99. For just backup you can get your whole computer backed up for 4.91 a month or 59 a year with Carbonite. Other questions that have to be asked are what type printer support ChromeOS supports. I’m sure they don’t support most of the printer drivers out there. I can see it now Hi teacher my assignment is on the Cloud… Another thing is let’s be honest how many people in fact use Google Docs? Last I checked they were at the bottom 2% fighting Open Office not to say Adobe had 4% of the market. Let’s be honest here Google Docs are more comparable to Office 95.A laptop for college students that would waste their money on this should more than likely not be in college and at a drive thru learning basic math.

Considering the fact that telecoms are trying every day to figure out how to gouge consumers with Bandwidth restrictions, etc. As a matter of fact, what is the real cost of putting everything online?The idea sounds neat however consumers want the cloud to be optional not required. Networks go down all the time, no business in their right mind would paint themselves into a corner with such a 1 dimensional device.

"No Exchange, SharePoint, Windows or other Microsoft server products would be necessary."Yep and Google Docs would replace all of that....NOT. I am sorry Joe nevertheless you need to stick to polls about Android vs iOS, or bashing on Microsoft consumer products.Exchagne is 100x better than any form of Gmail.. Sharepoint is 1000x better anything Google has.Our users would revolt, their managers and VP's would come down to the IT floor and demand Microsoft products back. Early this year we tried to move our Terminal server users to Exchange 2010 Webmail vs Outlook 2010. It laste 2 weeks previously several VP's demanded we put Outlook back on the Terminal servers. Exchagne 2010 OWA/Webmail is 100x better than Gmail webmail. I cant imagine what they would have done had we moved them to Gmail or Chrome OS + Gmail.Google products for the SMB that cares only about saving every dime will be a hit. Especially those SMB's that are too stupid to leverage IT to better their SMB. If you have smart SMB's at the time they will know the power of tools like Exchange, Sharepoint, Active Directory, SCCM, and leverage them to be the best at what they do....not the best at pinching a dime.

Nice math, however may I ask you this: What is the cost of selling your soul? Of all the business propositions I have ever come across has -anything- been more Creepy? And look at the irony of this. They announce this trust-us-with-all-your-data crap even as they are testifying in Congress over their inability to keep data of Android users private. What could be a bigger joke?

Partial failure

Amazon cloud has a "partial" failure.PSN has been down for weeks.Just two of a number of reasons not to have your entire business on the cloud.During this will take some business away from Microsoft, it's not likely to take any enterprise business away however rather the small business in the best case.

I call it "Pie in the Sky". Yes, the cloud is low priced nevertheless you get what you pay for. Low price, low service. I chose to maintain control over my infrastructue versus turning it over to someone somewhere in the cloud. My data is too critical to my business to trust to the cloud crowd. I will keep it local.

One of my first thoughts was that why can't Microsoft do the same? Offer a stripped down version of Windows + IE9, linked to Bing, and with a subscription to Office 365.The attractive part of the Chromebook is that it requires virtually no maintenance. The downside is the proposed MSRP of Chromebook devices is too expensive, considering that you can get inexpensive netbooks for $250. Even with a 2-year subscription, that's substantially less than $28 per month.

How could Microsoft lose billions from a useless brick when it's not connected to the web? Why would anyone want to use a device in other words 100% dependent upon an internet connection? I'll stick with a laptop that allows me to have access to my documents and email offline. 52 additional seconds of my life waiting for my computer to startup will never be an issue.

Also schools hospitals airports and business may use it as citrix is their partners..and lets see how the chrome-book or business and chrome box is first. We are commenting either black or white..nevertheless its more in the shade of grey.

Google's $28/month per user Chromebook subscription plan could accelerate movement to Google Apps, pulling away $1 billion Microsoft revenue per year, at first.

Android continues to gain momentum, with over 100 million Android devices now activated, and roughly 400,000 new activations daily.

The retail analyst firm takes a contrarian view about the impact Apple's tablet is having, or not, on U.S. PC sales. Do you believe it?

The best free Windows utilities around

NirSoft is famous for creating some of the best free Windows utilities around: tiny, portable and packed with useful features. However there are too many of them. NirLauncher solves the problem.