Some of you are likely to have heard me talk about this before – I have a fascination for how markets tend to divide themselves into two major players, with a bunch of “also rans” tagging along. The example I like to give is the cola market – Coca-Cola and Pepsi. There are hundreds of other examples, including Android and iPhone, Microsoft Windows and Apple macOS, FedEx and UPS, Aldi and Lidl, BMW and Mercedes-Benz, Costa and Starbucks, BBC and ITV (perhaps more true historically…), British Airways and Virgin, Persil and Ariel, Facebook and Twitter, and so on. Once you realise this apparent rule, you see it anywhere.
There’s another rule that works like this – the Pareto principle, that we often see things split into 80:20 ratios, a good example here being that it’s common to find that you get 80% of your income from 20% of your customers. This pairing tells us that we like things that come in pairs, that if we can split “domains” into “this and that”, we understand that domain better. This of course makes it harder for competition as all of the “top of mind” awareness goes to the two dominant players – newcomers have to fight against that entrenchment. It also suggests that where there isn’t a Coca-Cola and Pepsi pairing, there is an opportunity for a second player to follow and take up some of the first player’s market.
In IT, this plays out in two ways. Firstly, there is a huge advantage as a supplier in being the only player. Secondly, there is a huge advantage as a purchaser in that the market is easy to read – if you can identify the Coca-Cola and Pepsi in any market, choosing either one will likely yield good results. (Just avoid the Happy Shopper Cola.)
A peculiarity is that over the past 30 years is that there has never been a “Pepsi” challenger to the “Coca-Cola” that is Microsoft Office. It was dominant out of the gate in 1988, and it’s been dominant ever since. LibreOffice and Apache OpenOffice are both amazing efforts of engineering, but they have never got anywhere near the mindshare or market-share of Office. But there is a peculiarity in this of Google G Suite.
(I’m skipping over the wrinkle in that Microsoft is moving away from the brand name “Office”, effectively collapsing the core Office suits of Word, Excel, PowerPoint, and Excel into the base Microsoft brand.)
Microsoft’s “moat” used to protect Office has always been one of features. Office has always had so many features that realistically no one uses all of them – even “power” users likely only use a small subset of the features in all the Office applications over a year.
When Google set out to compete against Office with what was first called Google Apps and Google G Suite, they got around this moat-by-feature-set problem by championing a different usage method. Office’s usage method that users were working on local files that were (ideally) stored in the cloud. Google Apps wanted there to be no “local files” concept – files existed in the cloud and were edited directly on the cloud.
As a result, there was now a Pepsi to Microsoft’s Coca-Cola, and Google was able to sell to businesses an alternative to Office. Google also achieved a moat for itself because this usage model of being wedded to the cloud/the web was so radical compared to Microsoft’s usage model – i.e. Google managed to manoeuvre themselves around the moat and position themselves to business as an alternative to office on that basis of a differentiated usage model.
Over time we saw some consolidation through Microsoft’s first Office 365 and now Microsoft 365 offerings – both solutions offer an email service (Exchange or Gmail), a file storage service (SharePoint or Google Drive) and office applications (Word, Excel, etc or Google Docs, Google Sheets, etc).
Whenever I set out to recommend to customers anything, I like to propose a Coca-Cola and Pepsi choice – except for in two sets of limited circumstances, namely that on one end of the spectrum the first place player is so good the second place player is not worth mention, or that on the other end of the spectrum, there is too much choice. (One example where we see this today is in the CRM market for SMEs – there are scores of choices in this market, and there is no dominant player.) As such, I’ve always said to clients that so long as you choose Microsoft 365 or G Suite, you’re probably making a decent choice.
So this article is about me changing my mind on this, because for an SME G Suite doesn’t quite fit when all the variables are taken into consideration. The big issue is that all SMEs need the Office applications, because the G Suite equivalents do not cover the use cases SMEs generally require and as a result SMEs need Microsoft 365 subscriptions anyway. If you have those subscriptions, the argument for having G Suite goes away – you’re effectively just paying for Gmail in preference to using Exchange for your email, and there’s no point. There is an additional second argument in that Outlook on the desktop, Outlook on smartphone (either Android or iOS) flows better in terms of synchronising calendar and contact data, and that Outlook when paired directly to Exchange works better than Outlook when paired to Gmail.
There is a question as to whether it’s worth an SME migrating off G Suite and onto Microsoft 365, if that existing investment has already been made. My suggestion here is that SMEs should migrate, but as of now there isn’t too much in the way of urgency on this, and there isn’t anything looming on the horizon that would make this urgent. A corollary is that if you have plans to grow the business substantially (or merge or sell), this might be work worth doing now before the scale of the business increases as migration is more complex the larger the business is.