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Will Google Apps Break The Last Tech Monopoly: Microsoft Office?

This article is more than 10 years old.

Recently I've been writing about monopolies. When they're important and when they're not. The really crucial point is whether that monopoly is contestable or not. If it is, then any attempt to actually exploit that monopoly power will lead to the monopoly being contested and thus disappearing. This doesn't mean that all monopolies are contestable, certainly not. Only that we don't have to worry very much about the ones that are.

My first example was the Chinese near monopoly on the production of rare earths.

So let's just run through the story again. Until recently China provided 97 per cent of the world's rare earths. A bit of a problem as all our whizzy shiny shiny depends upon them to operate. As long as they're producing all we want at prices we're willing to pay, that monopoly is just fine. But then they started to throw that monopolistic weight around. As I said here in January 2010, this policy just wasn't going to work. For rare earths aren't rare (nor are they earths) and if the current supplier decides to try and rook us all we'll all go off and use another one. If there isn't another one then one will be along soon enough: the lust for profit will see to that.

In November 2010 I pointed out (here again) that two mines, Molycorp and Lynas, could alone provide a goodly portion of demand, replacing the Chinese production. We're in December 2012 as I write and as the first quotes show, those prices have been falling fast as the Chinese hold over supply is broken. Even to the point that the largest Chinese mine itself was closed for November of this year in an attempt to maintain prices.

Quite simply, yes, it was true that China had a monopoly on the supply. But there's potential supply all over the place and as soon as China started to throw its monopolistic weight around that potential supply became active supply. Attempts to exploit the monopoly thus destroyed it.

I then mused on whether there were any uncontestable monopolies in the tech world:

The great trick here though is which is a monopoly that can't be contested? Apple's iPhones? Nah, Samsung's shown that can be contested. Facebook's Ts&Cs? If they really get bad enough, Google+ is only a couple of clicks away. Google pleasuring company-owned results in the listings? Microsoft's “Scroogled” campaign is certainly trying to challenge that. Ebook pricing? I can't see that anyone would be able to exploit a monopoly there for any length of time: maybe on the back catalogues perhaps, but not on the new material.

In fact, in the current state of flux I'm not sure that I can see any non-contestable positions in the general computing market. There's enough VC money out there that anyone at all truly trying to exploit a monopoly position is going to face someone contesting it.

I was then challenged by an online friend that there is in fact an online monopoly that will last:

The two top problems which Google is going to have to tackle if it's to eat away at the MS Office monopoly are offline access and file format compatibility. If all your docs are online, and your company's Net access goes down for an hour due to a ISP problem or failed switch, all your employees are blocked from getting anything done; this is a very visible potential pain point. How to fix it? Google seem to be tackling this with some support for offline doc editing although presumably it's only good for working on docs that you were viewing before the Net connection went down. The second point is going to be the tricky one - how do you receive a Word doc via Gmail, store it somehow in a format that Google Apps can edit, edit it and then export it in the same Word format without encountering the Chinese whispers problem? It's going to be entertaining to watch how the format wars play out. Expect some manoeuvering from Microsoft if any competitor looks to be close to a fix for this.

Hemiposterical thinks that these problems are going to be sufficient to keep Microsoft's Office as a de facto monopoly in enterprise computing for some time yet. Which brings us to today's New York Times:

Google has been promoting the idea for more than six years, and it seemed that it was going to appeal mostly to small businesses and tech start-ups.

But the notion is catching on with larger enterprises. In the last year Google has scored an impressive string of wins, including at the Swiss drug maker Hoffmann-La Roche, where over 80,000 employees use the package, and at the Interior Department, where 90,000 use it.

One big reason is price. Google charges $50 a year for each person using its product, a price that has not changed since it made its commercial debut, even though Google has added features.

Hmm.

Microsoft’s Office suite of software, which does not include e-mail, is installed on a desktop PC or laptop. In 2013, the list price for businesses will be $400 per computer, but many companies pay half that after negotiating a volume deal.

At the same time, Microsoft has built its business on raising prices for extra features and services. The 2013 version of Office, for example, costs up to $50 more than its predecessor.

We get caught in some semantics here. Whether Office's near monopoly is contestable in the economic sense is an unknown as yet. We'll only find out if it is if someone manages to replace it. However, it is most certainly being contested by Google. And the very fact that it is being contested is going to put a brake on the ability of Microsoft to exploit that near monopoly position. Just the fact that Google offers something comparable at $50 a seat will limit Microsoft's ability to raise prices further up above $400 a seat.

Which rather brings me back to my starting point. If Microsoft isn't able to exploit its monopoly position then it doesn't particularly matter that it has such a position. That Google Apps exists is enough for us to be able to stop worrying about Office.

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