Google has been rolling out free versions of its word processor and spreadsheet products for months. They hope to entice corporations, big and small, to use this service instead of buying standalone productivity applications such as Microsoft Office. Google, like Yahoo and Microsoft, has been selling premium on-line e-mail packages for quite some time and think office applications dovetail nicely into this business. The e-mail services have been popular with individuals and small businesses because of their low or no cost. The fact that they lack the features of Thunderbird or Outlook matters very little to the technophobic low-usage public that doesn't want to install and, more importantly, configure an e-mail application. However, that won't be a problem for business of more than a few people.
What Google seems to be recreating is the ancient IBM PROFS suite. PROFS was developed by IBM in the 1970s and deployed on mainframes throughout the US Government. It had an integrated e-mail and calendaring system and was often used for word processing as well. PROFS got killed by client-server e-mail systems in the 1980s, though it lingered on under the name OfficeVision for quite some time until finally replaced by Lotus Notes and Domino.
PROFS became irrelevant for the same reasons that Google Docs and Spreadsheets are a tough sell for me. They can't create the kind of user experience you need in a word processor or produce the range of features desired in a spreadsheet. Even with all the new techniques for enhancing user experience, these applications are slow, quirky, and lacking in features when compared to established office suites. Even more importantly, you need to be tethered to a high speed network connection. That eliminates the ability to work on an airplane, secluded beach, or anywhere else that you can't get a broadband connection. A secure and reliable broadband connection at that. Add to that all the normal problems of network applications such as network congestion and overloaded servers – again the problems of mainframe applications – and you have to wonder why we seem to be going backwards in time.
There are also some special problems associated with SaS for office applications. For starters, you have to feel comfortable having your intellectual property and trade secrets housed off-site by different company. That pretty much killed the Storage Service Provider Market five years back. It scared the pants off corporate security analysts to have someone else control many classes of corporate data. Will spreadsheets be okay somehow? What about privacy? Will there be problems if I write a performance review or termination letter in Google Docs?
A key argument in the sales pitch for office SaS is that the cost of applications such as Microsoft Office are high. True enough. The latest version of Office is very expensive not only to buy but to deploy. You have to believe that the benefits of the revamped Office interface will pay off enough to overcome the costs of retraining and supporting confused workers.
There are alternatives that don't include a feature poor service. You can avoid the high purchase costs of upgrades or even new deployments by using open source applications such as Thunderbird for e-mail and the OpenOffice.org productivity suite. There are a number of lower cost commercial suites as well such as the storied WordPerfect. All of these are perfectly good for the modern office. Besides, no one says you have to update you word processor just because Microsoft has a new version. With on-line applications, you may not get the choice.
Ultimately, SaS makes sense when there is a natural advantage to being connected. In that case, you are going to be networked anyway. Intranet portals, order entry, customer management, workflow management, and group calendaring makes sense as a service. To be useful, they have to have access to a central data repository so you might as well make the whole system centralized. Productivity applications are designed around individual work and need to be available when there is no network.
Google thinks they can take us back to the days of PROFS. Nice idea but I doubt it will work. Centralized mainframe office applications suffered a quick death for a reason. Those reasons haven't changed. While they may get a bunch of consumers to use these applications and sell ads around it (nothing wrong with that) they won't get a sufficient number of corporate clients to make it viable as a Word or Excel killer. If I were Microsoft, I would be more worried about the Open Source community than Google's on-line apps.