Microsoft, Google Prepare for Arms Race

Microsoft and Google are currently readying themselves for a battle that could very well alter the way companies within the computing industry compete, as well as how the world employs information technology, The New York Times reports.

“This is hypercompetition, make no mistake,” said Bill Gates, Microsoft’s chief software architect, in an interview last year, according to The Times.

The rivalry between the two tech titans is heating up, and neither Microsoft nor Google will be waiting around to see what the other does next. Just last Thursday, Microsoft said it would significantly bump up its spending in 2007 to roughly $2 billion more than previously predicted, The Times reports. Analysts say much of that increase will be devoted to countering the threat posed by firms such as Google that offer advertising-supported Web services and software, according to The Times.

Richard Sherlund, an analyst with Goldman Sachs & Co., told The Times, “Microsoft doesn’t have to kill Google, but it has to narrow the gap.”

In other words, if Microsoft wants to keep its head above water, it needs to bolster its presence in the Internet software and services space.

Both companies have their own distinct advantages moving forward. Microsoft’s market-leading PC software business lends the company strong footing, and Google’s unique insight into the world of Internet services gives it an upper hand, according to The Times.

The Web business model offers search, e-mail, calendar, contacts and word-processing capabilities that can be accessed remotely via any PC, handheld or other device that has a Web browser, The Times reports. In the past, Google has created new services or functions, offered those services free of charge, and then only after that service goes live does the company determine a way to profit from it via advertising, according to The Times.

Such ad-supported, Web-distributed software challenges the way Microsoft has sold licensed desktop software in the past, at least on the consumer level, The Times reports. Some small companies think Google’s strategy gives it a similar competitive advantage to Microsoft’s bundling of more and more software applications and features into its Windows OS, according to The Times.

Google’s method of buying companies and then offering their products or services for no charge has left those related markets in disarray, The Times reports. For example, Google recently offered free versions of SketchUp’s sketching software and Urchin’s Web metrics product after purchasing both firms, according to The Times. Google also recently won a contract to provide free wireless Internet access to San Francisco’s residents, in which it plans to profit from local advertising, The Times reports.

Google is also attempting to make inroads into Microsoft’s main market with its recent acquisition of Internet-based word processor Writely, according to The Times.

It’s unclear what effect that purchase will have on the Redmond, Wash.-based software giant, but Microsoft is worried that Google could become a sort of dominant OS of the Web, the way its Windows OS owns the browser space, The Times reports.

John Battelle, editor of search technology Web log, SearchBlog, told The Times the whole ordeal boils down to the quality of the each company’s offerings. “In the long run, it’s all about whether you have the best service,” he said.

For related news coverage, read Google Searches for Fight With New MS Browser.

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