I am seeing things in the marketplace that make me believe that Google will in fact out flank Office and disrupt Microsoft to a degree that few expected just a year ago.

First of all, there is a drum beating in the media for an epic battle between Mister Softie and Google. The article this weekend in the New York Times ( Google Gets Ready to Rumble ) has been the subject of much discussion on the Interwebs.

From the article:

[...] Google introduced a package of online software offerings, called Google Apps, that includes e-mail, instant messaging, calendars, word processing and spreadsheets. They are simpler versions of the pricey programs that make up Microsoft’s lucrative Office business, and Google is offering them free to consumers.

Second, we work with Google Apps everyday – our firm, LTech Consulting, is a Google Enterprise Partner. The pace that we have seen requests for migrations from Exchange to Google Apps has accellerated to the point that we are now opening new offices, hiring more people, and otherwise busier than we’ve been in a long time. Our experience is just one small slice – mere anecdotal evidence that Google is truly disrupting Microsoft. We also work with Microsoft tools like Sharepoint and the Office suite. For every 10 projects that we see that are Apps related, we see 1 Microsoft Office specific project. Does that reflect the reality of the entire marketplace? No. But it has to mean something.

Third, Google is not merely attacking Microsoft with Apps. It is attacking IE with its support of Firefox. It is attacking the server platform with its nascent, yet powerful, GData APIs. Along with Amazon, APIs and Web Services are become the foundation of the next-web – not Web 3.0, but a whole other beast altogether. And on the platform front, Apple is helping to erode market share of Windows.

But what does it all mean? In what way will Microsoft be disrupted other than a slowdown in revenue growth over a long period of time? What is the answer for Microsoft? Well, I have a sweet spot in my heart for Gates & Co. and I want to see them succeed. I owe the formative years of my career to the powerful, easy to use, and well-supported development environment of Visual Studio. Here is what I think (hope) will happen.
Microsoft will split into 5 companies that can openly work with or compete with one another.

If Billy G is still involved, it might look like this:

Microsoft will organize itself into 5 openly competitive business units.

Here is how it might look:

1. OS Company: Sells operating systems for devices, workstations, home computers, and servers
2. Development Tools Company: Sells IDE’s, development tools, development platforms. .NET becomes truly multi-OS compatible (absorbs Mono project)
3. Productivity and Collaboration Tools Company: Office, web office, SharePoint, etc. Develops full featured collaboration tools for any platform, including Web.
4. Web Services Company: MSN, Search, Live, etc. Starts incubating new ideas again (see Expedia)
5. Gaming Company: Let’s face it – save for XBox, Microsoft really hasn’t had any hits lately. The next generation of XBox services get decoupled from the mothership and continue to provide innovative online play and adult-oriented gaming.

What do you think?