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Google vs Microsoft: Digging into the public cloud email market duopoly

The public cloud email sector is a veritable two-horse race, with Microsoft and Google being the ones to beat, but it is unlikely ever to become a “winner takes all” market, says Gartner

Upgrading from an on-premise email system to a cloud-based setup is often categorised as one of the easy, early-day wins for any enterprise looking to embark on a multi-year, wholesale move off-premise.

And it could be argued that one of the reasons why this is such an easy switch for enterprises is because the cloud-based productivity market is a verified duopoly, where Microsoft Office 365 and Google’s G Suite rule the roost.

This is also not a situation that looks set to change any time soon, according to Jeffrey Mann, research vice-president for digital workplace at IT market watcher Gartner, because there are no significant challengers in the market or on the horizon that are likely to pose a direct threat to the pair’s dominance.

There are some players that have the potential to supply parts of the functionality that both Microsoft and Google’s productivity suites provide, but there is no single entity out there that could usurp either party in a total sense, said Mann.

Enterprises could, perhaps, cobble together the constituent parts of what both Microsoft and Google offer from other suppliers, but really the cloud productivity market is a two-horse race, he said.

“The challenge is coming not so much from a frontal attack on all fronts by a single supplier, which would be difficult to do,” he told Computer Weekly. “There is no one doing another suite of email, plus conferencing  tools, plus instant messaging and combining it with document management.

“The alternative seems to be [organisations] opting for best of breed, with people adopting technologies such as Slack and Zoom and partnering that with Dropbox. That’s the alternative to the two market leaders.”

And some of the firms benefiting from enterprises that have taken a piecemeal approach to building out their productivity toolkits have been won over by positioning themselves as a simpler and more straightforward alternative to the bigger and bulkier Office 365.

Cloud-based team collaboration software supplier Slack is an example of a company that has done that in the past, said Mann. “They were trying to say, you don’t need [everything] that’s in Office 365, and we don’t do it all, but we have what you need.”

Google touts simplicity to win over Microsoft users

Google has also embarked on similar messaging to great effect in the past, particularly when it comes to persuading longstanding users of on-premise Microsoft Exchange not to pursue an upgrade path that would see them logically make the switch to Office 365.

“One of the big issues Microsoft has [with Office 365] is that it is big, bloated and complex, so Google really emphasises simplicity,” said Mann. “G Suite is cloud-only, they have nothing on-premise and they don’t do hybrid.

“Everything is done through the browser, pretty much, and they’ve got three licensing plans, whereas Microsoft has around 50, depending on how you count them up.”

Even so, as Gartner’s own data confirms, it is Microsoft that holds the lead in this duelling duopoly, with Microsoft’s share of the public cloud email market rising from at least 14.4% in March 2018 to 16.6% in April 2019.

And that is thanks, in no small part, to its on-premise legacy, which Mann credits with giving the firm a significant advantage over Google, whose own share of the market has also increased over the same period, from at least 9.4% to 10.3%.

“Microsoft absolutely dominated on-premise, and the only real opponent it had there was IBM, which has pretty much given up [having a productivity play] and gone from the market,” he said.

Read more about public cloud trends

“A lot of people are going to Office 365 without necessarily thinking about alternatives or really thinking about going anywhere else. If you’re happy with Microsoft, and so are your users, then it’s a natural thing to do.”

According to Gartner’s take on the data, when enterprises are plotting to move away from on-premise office productivity tools, about two-thirds opt for Microsoft and the other third go to Google.

There are some distinct, vertical market adoption patterns that become apparent when digging into some of Gartner’s usage data, which is compiled by looking at what Mann calls the “guts of the internet” and using that to assess exactly where people “route their email”.

This provides Gartner with a “real-world” view of what is going on, said Mann, but he is the first to admit that this approach does have some limitations. For example, it is only email usage data that it collects in this way, which the firm uses to give it an idea of how the overall cloud office productivity market is faring.

“Also, because of the way we collect the data, if there are hybrid deployments, whereby someone has partly on-premise or is partly in the cloud, that is classified as unknown,” said Mann.

“The same thing applies if you are using third-party spam filters or if you have your email configured in a strange way. And it’s also limited to [tracking] publicly traded companies.”

Use case patterns 

Combining this information with anecdotal evidence shows that Microsoft is often favoured by organisations in highly-regulated industries, such as finance, insurance, pharmaceuticals and aerospace, because its technologies are usually “historically” entrenched there. Meanwhile, Google tends to pick up customers in the education, retail, media and entertainment sectors, and the tech startup community.

And while the data is unable to confirm the absolute number of enterprises using either Office 365 or G Suite, it provides an overall feel for how things are panning out. “For that reason, it’s always going to be a higher number [in reality] than is shown, which is why we say it is ‘at least, say, 20% using this or that’,” said Mann.

Even so, with Microsoft leading the market, Google’s share still means that if its parent company, Alphabet, decided to spin off its G Suite operations and treat it as a standalone entity, it would still be worth “well over” $1bn in revenue, said Mann.

“Google doesn’t need to beat Microsoft,” he added. “Being number two in a multibillion-dollar market is a perfectly fine place to be – and, in the same sense, Microsoft does not need to drive Google from the market either.

“Yes, they are beating them and they are winning, in terms of getting more market share, but Google has made a defensible, considerable niche for itself. Microsoft is winning, but that doesn’t mean this is going to be a winner-takes-all scenario.”

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