P&G Flirts with Google Apps and Scares the Bejesus Out of Microsoft

Does Google Apps pose a threat to Microsoft? No way, said Microsoft CEO Steve Ballmer in April 2007. He made his point clear to attendees at the USA Today CEO Forum: “[Google has] come out with what I might call—what’s the politically correct way of saying it?—they’ve come out with some of the lowest functionality, lowest capability applications of all time.”

The room filled with laughter.

Ballmer—for one—is not laughing now. That hubris and short-sightedness is coming back to haunt him.

Microsoft is now taking the threat from Google quite seriously: In July 2008 COO Kevin Turner was dispatched to consumer-products giant Procter & Gamble to dissuade P&G from moving to Google Apps—and ditching Microsoft.

Back in February 2007, Google launched the Google Apps edition for businesses. Executives told media outlets that initial customers included a unit of Procter & Gamble. At some point in 2008, hundreds of P&G employees were testing Google’s e-mail, word-processing and spreadsheet applications as potential replacements for Microsoft products, according to a recent Bloomberg article about the P&G incident.

P&G execs viewed Google’s new tools as cheaper and more Internet-capable options than what Microsoft was delivering. (To read two stories of large organizations adopting Google Apps, see “Fighting Government Waste One Google App At a Time” and “Cost Savings Found When Microsoft Outlook Ousted for Gmail at British Construction Firm.”)

P&G, of course, is a massive consumer products goods company, with $84 billion in annual revenue this past year. To lose that kind of a customer—especially to Google—would have been catastrophic for Microsoft.

“Losing a Procter & Gamble would be something where I don’t think I’d sleep well,” says Turner, in the Bloomberg article. “I want to make sure that anybody that knows anything about it would also not sleep well.”

So Turner flew to P&G’s headquarters in Cincinnati in July, spent a day wooing P&G CIO Filippo Passerini, and left with a three-year contract, according to the Bloomberg article. How’d Turner do it? He “kept the contract by giving Passerini an early look at plans for Web-based systems and promising P&G the flexibility to shift between those and standard applications,” notes the article. (P&G confirmed the deal to Bloomberg, but declined to comment.)

So the day was saved, but what about the future? Microsoft’s sales growth may wind up slowing to 12 percent in 2008, from 18 percent last year, according to estimates by Bloomberg News. Competitors, from Google to Oracle to SAP, abound. And with the economy in turmoil and a looming corporate tech spending nosedive, cross-country flights to save accounts by Turner or other Microsoft execs appear more portentous.

Still there is a bright side if such emergency cross-country flights become common: At least Turner will be able to count on getting plenty of frequent-flier miles.