Startups give Google thumbs-up over Microsoft

SAN FRANCISCO Fri Jul 10, 2009 8:27pm EDT

Michael Dell (L), chairman and CEO of Dell Inc and Eric Schmidt, CEO of Google, talk at lunch at the Sun Valley Inn in Sun Valley, Idaho July 10, 2009. The resort is the site for the annual Allen & Co's media and technology conference. REUTERS/Rick Wilking

Michael Dell (L), chairman and CEO of Dell Inc and Eric Schmidt, CEO of Google, talk at lunch at the Sun Valley Inn in Sun Valley, Idaho July 10, 2009. The resort is the site for the annual Allen & Co's media and technology conference.

Credit: Reuters/Rick Wilking

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SAN FRANCISCO (Reuters) - Silicon Valley startups, increasingly dropping Microsoft and turning to Web-based software, may be the crucial opening Google needs for its Chrome operating system.

Analysts and executives say Google, which unveiled the Chrome this week in a direct challenge to Microsoft's decades-old dominance of computer operating systems and business applications, will take years to get significant share of the market, but startups might be their way in.

A growing number of tech entrepreneurs argue that Microsoft's current software is out of date and inefficient because, unlike applications that run off the Web in a "cloud" environment, they run one copy per person at a time, rather than allowing multiple users to share information.

"In a business setting you never work on things alone," said Tien Tzuo, chief executive of Zuora, a company that sells software to facilitate billing online.

"The idea of sending a file back and forth is just archaic," said Tzuo. "Why not just give employees an inexpensive device that allows them to plug into the Internet?"

Microsoft's Windows nonetheless dominates. It remains the operating system software for about 95 percent of PCs, with more than 950 million copies running worldwide.

Key to Windows's success is that it offers the most applications and draws the most programmers. But startups, who thrive on low-cost efficiency, say Google's operating system -- which will be free -- offers superior applications.

Many have already switched to Web-based software such as Google Apps for everything from email to word processing.

TRAVELING LIGHT

David Sifry, the chief executive of Offbeat Guides, which provides personalized on-line guides for 30,000 destinations, said Google Apps allow him to travel without a computer because he can access all of his applications on-line.

Also, with operating system-based applications most companies would have to maintain, update, install, costing time and money, he said.

In contrast, Offbeat Guides contractors around the world collaborate online with the main office, Sifry said.

"The fact that I don't have to worry about doing technical support on their computers and software helps an extraordinary amount," he said. "Whenever Google does a bug fix it works on all of their systems, without us having to spend any effort."

Analysts estimate about 2 percent of PC users will try out the Chrome OS in its first year.

Google has said it will first try to persuade the likes of Hewlett-Packard and Acer to offer its operating system in low-cost netbooks that work mostly off the Web, allowing existing individual users to switch painlessly.

But analysts are uncertain if Google's Chrome can gain rapid traction among corporations, law firms and other businesses because of the sheer cost of switching.

James Siminoff, chief executive of PhoneTag -- which faces direct competition from Google for software that transcribes phone messages -- uses both Google and Microsoft and similarly lets his employees use any application they want. But he concedes that some Microsoft applications remain indispensable.

Both Siminoff and Sifry say they need at least a few copies of Microsoft's Excel spreadsheet software so they can exchange data with lawyers and accountants.

Chad Wilbur, a senior Quist Valuation financial analyst, said Excel enjoys "mindshare" among long-standing users.

"It's beat into you from the time you learn on a computer. All our client documents arrive in Excel format. There are no comparable products," he said.

But Tzuo argues that will change.

"Sure, there are certain functions that are still only in Excel," he said, noting his finance department uses it for complex spreadsheets spanning multiple files. But every day that passes, the number of things that Excel does, that Google Spreadsheet doesn't, gets smaller and smaller."

(Editing by Edwin Chan and Tim Dobbyn)

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