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Los Angeles City Hall becomes tech giants' battlefield

Microsoft and Google are vying for a $7.25-million contract to replace an outdated e-mail system.

September 28, 2009|David Sarno

As Google and Microsoft battle for dominance in technology, a skirmish in Los Angeles City Hall is offering a rare public glimpse into a rivalry that could help determine the fortunes of both companies -- and, quite possibly, how workers in the future will communicate.

The two tech giants are clashing over a $7.25-million contract to replace L.A.'s outdated e-mail system. The stakes are high enough that both companies have fielded teams of lobbyists and executives to press their case in City Hall.

City officials have also been told that Microsoft Chief Executive Steve Ballmer and Google CEO Eric Schmidt "would be more than happy to come and visit with you," said City Councilman Tony Cardenas, who chairs the council's information and technology committee.

Google is widely believed to have the most to gain from a victory as it seeks to challenge Microsoft's long dominance in office e-mail and document software.

"It would be a flagship contract that they can market to the rest of the country," Councilman Bernard C. Parks said. "When you buy it and they put on their masthead that you're one of their customers, you find a trail of cities that say 'I'll follow suit.' "

Microsoft's Office software has been the engine driving business documents and e-mail for more than a decade, accounting for 70% of an estimated $20-billion annual market.

But Google is posing a threat with its Google Apps office software, which is anchored by its popular Gmail service. Thousands of colleges, including USC and Notre Dame, and nearly 2 million businesses have adopted Google Apps, the company says.

Most schools and small businesses get Google Apps for free, but the company has also converted some heavy corporate hitters into paying customers, including biotech company Genentech, electronics maker Motorola and chip maker Fairchild Semiconductor.

As the battle plays out in executive suites and information technology departments around the U.S., the outcome could determine whether businesses continue to store software and data on their own computers, as most do now, or allow companies such as Google to store it all online in the so-called digital cloud.

"This is a story of two very large companies going head to head in a battle for the future of the heart and soul of the technology world," said David B. Yoffie, a dean and professor of business strategy at the Harvard Business School. "If Google wins, the way that we look at our day-to-day computing will be 100% focused on the cloud."

Google's main selling points are the cost and convenience of its Web-based approach. Because all data and programs are stored on the company's global network of servers, organizations can jettison their large data centers and the staff members who look after them.

"If there's anything that's making it happen in 2009, it's budgetary problems," said Dave Girouard, the president of Google's Enterprise division. "It's a good time to have a dramatically lower-cost solution."

Many users like it too: Those capacious Gmail accounts don't clog up the way old-school e-mail in boxes do. What's more, documents and spreadsheets can be accessed and edited through any Web browser, at the office or otherwise, instead of being saved on a single computer's hard drive.

But Microsoft has sought to take some of the shine off Google's vision of computing.

In an interview, Microsoft executive Ron Markezich contended that Google's cloud model was still something of an experiment for business customers. Google lacks Microsoft's long experience with companies in highly regulated industries such as pharmaceuticals and financial services, he said, where security and the smooth flow of data are paramount.

That argument may have been bolstered by a pair of Gmail glitches this month that shut down the service for hours, leaving tens of millions of users unable to access their e-mail. That could be particularly troublesome for a big city such as Los Angeles, said Markezich, who is vice president of Microsoft's Online division.

"My genuine concern is using a service built for consumers as a complex, public sector service," he said.

In response to doubts about its experience, Google notes that it has replaced mail systems at dozens of large corporations and has provided search and other services to an array of federal and municipal organizations.

One of those clients is Washington, D.C., which a year ago launched a pilot program to install Google Apps. Since then, the nation's capital has seen productivity gains and cost savings, said its chief technology officer, Chris Willey.

But it did not replace its older e-mail system, as Los Angeles would. Of Washington's 38,000 employees, only about 4,000 have chosen to switch to the Google system -- the rest have remained on Microsoft Outlook.

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