Microsoft Tries To Head Off Google At Netbook Pass

Last week at the Barclays Capital Technology Conference in San Francisco, Robert Youngjohns, president of North American sales and marketing at Microsoft, acknowledged that Google is "clearly a major competitor" to Microsoft, one that has elicited no small measure of concern within the hallways of Redmond.

"We clearly are concerned about Android and Chrome at the low end, and we will compete vigorously, particularly in the low end netbook space to make sure we preserve what we've achieved now with Windows," Youngjohns said during a Q&A at the event. "We think our ecosystem is really the differentiator there."

Netbooks have been eating away at Windows client revenue, and Microsoft hasn't yet shown it can convince customers to pay more for Windows 7 on netbooks. And with Google planning to bring Chrome OS-powered netbooks to market next year, already miniscule netbook prices are likely to shrink even further.

So why is Microsoft so geared up to go after Google in the netbook market? In the opinion of VARs, Microsoft wants to slow Google's steady incursions into the small business market, where it has been converting Microsoft Office customers into Google Apps customers. Needless to say, that type of churn has implications for other areas in which the two companies compete.

"There's no question that the important small business segment is far less Microsoft-friendly than it was just a few years ago," said Marc Harrison, president of Silicon East, a Microsoft solution provider in Manalapan, N.J.

If Google continues to win the hearts and minds of small businesses, it could conceivably use this foothold to target the crown jewels of Microsoft's enterprise software business. Although Google Apps isn't yet a serious threat in this regard, the growing prominence of Android on mobile devices shows that Google is able to penetrate new markets quickly and execute on its vision.

"I think Microsoft should be concerned about netbooks, especially given how capable Android seems to be on phones and given the number of applications that are already available," agreed Andrew Brust, chief of new technology for twentysix New York, a Microsoft partner in New York City.

Unsurprisingly, Microsoft sees its application ecosystem as the key to winning this battle. "I think that's a really important differentiator to us, and we need to continue to drive that in order to protect our flanks," Youngjohns said at the Barclays event.

Microsoft has traditionally relied on its incumbent status and the huge number of applications that exist for the Windows platform, but netbooks present a new challenge for Microsoft, says Michael Cocanower, president of Phoenix-based Microsoft solution provider ITSynergy.

"Microsoft doesn't have that base of applications for netbooks, and so in my mind, the race is on to drive development of a new generation of applications specifically for netbooks," said Cocanower.

Netbook-tailored apps could be scaled-down versions of existing Windows apps optimized for netbook usage, or an entirely new generation of apps designed from the ground up for the Android or Google platform, notes Cocanower. With a Windows netbook attach rate north of 90 percent, Microsoft has a head start on Google, but that's not guaranteed to last.

"I think Microsoft clearly has the advantage in terms of starting position, but they can't afford to rest on their laurels," said Cocanower.