Microsoft, Google clash over e-mail dominance

LOS ANGELES — As Google and Microsoft battle for dominance in technology, a skirmish in Los Angeles City Hall is offering a rare public glimpse into a rivalry that could help determine the fortunes of both companies — and, quite possibly, how workers in the future will communicate.

The two tech giants are clashing over a $7.25 million contract to replace Los Angeles' outdated e-mail system. The stakes are high enough that both companies have fielded teams of lobbyists and executives to press their case in City Hall.

City officials have also been told that Microsoft Chief Executive Steve Ballmer and Google CEO Eric Schmidt "would be more than happy to come and visit with you," said City Councilman Tony Cardenas, who chairs the council's information and technology committee.

Google, based in Mountain View, Calif., is widely believed to have the most to gain from a victory, as it seeks to challenge Redmond-based Microsoft's dominance in office e-mail and document software.

"It would be a flagship contract that they can market to the rest of the country," said Councilman Bernard Parks. "When you buy it and they put on their masthead that you're one of their customers, you find a trail of cities that say 'I'll follow suit.' "

Microsoft's Office program has been the engine driving business documents and e-mail for more than a decade, accounting for 70 percent of an estimated $20 billion annual market. But Google is posing a threat with its Google Apps office software, which is anchored by its popular Gmail service. Thousands of colleges and nearly 2 million businesses have adopted Google Apps, the company says.

Most schools and small businesses get Google Apps for free, but the company has converted some heavy corporate hitters into paying customers, including biotech company Genentech, electronics maker Motorola and chip-maker Fairchild Semiconductor.

As the battle plays out in executive suites and information-technology departments around the country, the outcome could determine whether businesses continue to store software and data directly on their own computers, as most do now, or allow companies such as Google to store it all online — in the so-called digital "cloud."

"This is a story of two very large companies going head to head in a battle for the future of the heart and soul of the technology world," said David Yoffie, a dean and professor of business strategy at the Harvard Business School.

Google's main selling points are the cost and convenience of its Web-based approach. Because all data and programs are stored on the company's global network of servers, organizations can jettison their data centers and the staff to look after them.

Many users like it, too: Those capacious Gmail accounts don't clog up the way old-school e-mail in boxes do. What's more, documents and spreadsheets can be accessed and edited through any Web browser, at the office or otherwise, instead of being saved on a single computer's hard drive.

But Microsoft has sought to take some of the shine off Google's vision of computing.

In an interview, Microsoft executive Ron Markezich contended that Google's cloud model is still something of an experiment for business customers. Google lacks Microsoft's long experience with companies in highly regulated industries such as pharmaceuticals and financial services, he said, where security and the smooth flow of data are paramount.

That argument may have been bolstered by a pair of Gmail glitches this month that shut down the service for hours, leaving tens of millions of users unable to access their e-mail. That could be particularly troublesome for a big city such as Los Angeles, said Markezich, vice president of Microsoft's Online division. "My genuine concern is using a service built for consumers as a complex, public-sector service," he said.

Fed up with Novell e-mail software first installed in 1995 and dubbed "the slowest, most inefficient, crash-prone e-mail system in the history of mankind," by the Mayor's Office, Los Angeles city officials last year solicited bids for a modern replacement.

Both Microsoft and Google submitted proposals; Google Apps got the nod because city administrators believed it would be cheaper and less labor-intensive. The contract has passed one council committee and must still pass a second before it goes to a final vote by the full City Council.

According to records from the city's Ethics Commission, Microsoft has spent more than $40,000 this year on all Los Angeles city-related lobbying. Google and Computer Sciences — the company that hopes to install the Google system — registered lobbyists this year as well, paying them less than $10,000 in the same time period.