Google. Microsoft. Cloud Based Apps. Fight!

So Microsoft is feeling the heat from Google Apps.

Must be the case if Monkey Boy’s Microsofties have decided to go for an all out attack on the Gnomes of Mountain View.

Microsoft recently released a video telling Monkey Boy truths about Google Apps.



Now while I don’t necessarily believe that Google Apps is the greatest thing since Cuban Cigars and Premium Vodka, its not a bad product and it has a pretty good price point story to tell.

The truth is that Office 365 is very expensive, especially in Australia.

Now a friend of mine showed me a couple of emails relating to Office 365 discussions he had with Telstra before he told them to get a grip on reality.

The first, and biggest question was based around the variation in cost between most of the world and Australia. Across the planet the cost, predominantly, equates to USD$24 per user per month, for the plan he was looking at, in Australia its AUD$40.10 per user per month for the same plan.

As I write this the exchange rate is hovering around USD$1=AUD$1.06.

This means that it should be costing around AUD$22.64 per user per month. Its a cloud service, no boxes to move, distributors to take a cut, product to feeight into the country, DVD’s to produce, packaging to manufacture and so on so where’s the price differential?

I mean the data centre that runs Office 365 for Australia is in Singapore and is the same one that is used in Singapore where the cost is $24 per user per month and in the absence of anything else it looks like its priced in the local currency.

So what was the explanation from Telstra for the price variation?

As to pricing differences between AU and US, It is a common practice by all multinationals to have price discrimination based on Geography. If you compare the prices of Petrol, iPods, TVs Big Macs, there is a price discrepancy based on the purchasing power of that that country.

We still believe that purchasing Microsoft Online Services will be more cost effective than on premise software. But also consider this, the Australian currency is the 4th most traded currency. Between July and October 2008 our currency fell from 97c to 61c.

Hmmmmmm…..

So the strongest argument Telstra had was that ‘all multinationals to have price discrimination based on Geography’, unless you live in Singapore, in Russia the price converts to USD$30 per user per month, and that three and a half years ago the Australian dollar fell from 97c to 61c.

Sorry but that’s ancient history.

Here’s the thing AUD$40.10 converts to USD$42.75. So if we use USD$25 per user per month as a base price someone in Australia is levying a massive tax on all Australian businesses to use a product that supposed to help reduce costs.

Lets do the math.

A business of 100 staff in the US will pay $2500 per month or $30000 per year to use the cloud based Office 365.

A business in Australia with 100 staff will pay $4010 per month or $48120 per year to use the same product running on a data centre ‘out there somewhere’.

Convert the annual US price to Australian dollars at todays exchange rate and the price becomes $28122 per year.

So it costs an Australian company $19998.00 per year more to use Office 365 in Australia than it does in the United States for an equivalent number of users.

No wonder Microsoft is taking aim at Google Apps.

Back to the Future

Welcome to the cloud. Its going to change your world. Really.

I’ve just gone back to the 60’s, 70’s and early 80’s...and no its not a bad acid flashback!

Recently I had a chance to sit down with a potential customer who wanted to drive down their technology costs by “moving our applications into the cloud, consolidate our server farm onto a smaller number of virtualised servers that we’re going to co-locate in an off-site data centre where we’ve rented rack space”.

I nodded at him when he asked “Have you done any of this sort of thing before”?

I smiled and said “Yep. The first time I did this was about 25 years ago.”

I got a smug response saying “No one was doing this 25 years ago, in fact no one was doing this 10 years ago. This is cutting edge technology.”

This is the point that I know that I’m dealing with someone from the shallow end of the gene pool who’s “drunk the kool-aid”.

Let’s get one thing straight here and now - this is 60’s technology that’s been dressed up to appeal to the new techno-hip who think everything with any technological cachet has a lower case “i” in front of its name.

Just like a filler on Rocky and Bullwinkle lets saddle up with Sherman, Mr. Peabody and the WABAC machine and travel back to the swingin’ 60’s to have a look at this wonderfully new invention called the “cloud”.

Here we are in Armonk, New York around 1964 when some charcoal suited IBM guy signs off on CP-40. By 1972 this evolves into IBM’s VM and its with us to this very day as ripping along on IBM mainframes delivering virtual machines up the wazoo to all and sundry and its been doing it for the past 39 years.

Suddenly its cost effective for companies to buy a mainframe and lease VM’s to customers on a machine that’s hosted in their data centre (usually housed in some nondescript building in an industrial park) and the terminals in the customer office all connect back to a box called a “cluster controller” that connects back to the mainframe via a line leased from your telco.

In current techno speak we’ve got blade servers in a high availability virtualised configuration co-located in a data centre with high speed tails into the telco cloud connected to a router which connects to the machines downstream from it in the enterprise.

In essence these two solutions split by nearly 40 years of technological advancements are the same.

Now let me prognosticate about what will happen in a few years.

As the business matures and costs drop, margins shrink and the guys in the business of delivering “cloud-based, virtual machine environments in co-lo data centres” will begin to let their service levels drop to protect their margin and EBIT.

Then some genius in a university somewhere will come up with some ground breaking idea on how to better share computing resources “in-house” and suddenly the “cloud” will become disappearing wisps of water vapour.

Everything will come back into the local premises and some marketing genius will come up with a new term for it (in the late 80’s it was a LAN) and a whole new generation of attention span challenged techno-literati will again “drink the kool-aid” and the roller coaster will go off onto its next trip around until someone comes up with a new version of the cloud...

This isn’t new or ground breaking as marketers and the press would like you to believe. Its a slow evolution of established centralised computing technology that’s driven by valid economic reasons that will lead to another evolutionary change in distributed computing that will change the way corporate computing is run taking it back to being locally hosted and run.

The more things change, the more they stay the same...

It’s true what they say about history and being doomed to repeat it...