Why Apple Inc. (AAPL)’s Head Is in the Cloud

Google Inc (NASDAQ:GOOG)

I don’t need to tell you that Google Docs is popular. But I will anyway. Consulting firm Gartner was surprised to find that between 33% and 50% of cloud-based office users were on Google Docs in 2012 — compared with 10% in 2007. That’s huge growth and a huge market share for a product competing with the one called “Office.”

Of course, Google Docs is free (with the exception of their enterprise offerings), meaning the product produces only a little more than 1% of Google’s revenue. Still, like many of Google’s offerings, Docs is about bringing users into the Google ecosystem.

Unlike Office, Google has built Docs from the ground up as an online tool, while Microsoft has had to adapt its offerings for the cloud. In some areas, Google might never be able to replicate Office. But for many businesses, Docs might be a viable option.

And as working in the cloud becomes more normal, I think you’ll see more and more enterprise customers turning to Google’s solutions for their document, calendar, and email needs. Last year, Google Apps provided $1 billion in revenue for Google. That still makes up only 1.4% of the tech giant’s revenue, but I’m not the only one who expects that number to grow.

The bottom line

The real competition here is between Google and Microsoft. Both have full-featured cloud-based suites that provide a viable option for enterprise and small-business customers. And many regular consumers are likely to choose either Office or Google Docs for their office suite needs, even if those consumers use Apple products.

In some ways, the two companies are competing for different customers. But I think Google will continue to eat into Microsoft’s cloud-based office market share. Nonetheless, Microsoft is making strong moves to solidify its position in a market where complacency can be deadly.

And speaking of complacency, Apple has been slow-moving on cloud-based office solutions. One could’ve been forgiven for thinking it had simply given up the fight before this year’s WWDC, where we saw a glimmer of what might be. Still, Apple needs to make big changes before they can hope to provide a cloud-based office solution for anyone but the most dedicated fans.

Steven Yenzer owns shares of Apple. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, and Microsoft.

The article Why Apple’s Head Is in the Cloud originally appeared on Fool.com and is written by Steven Yenzer.

Steven is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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