Microsoft’s increasingly strong Office 365 performance is coming partly at the expense of Google Apps. Motorola’s recent decision to move from an elderly version of Office to Google’s cloud service bucks the more common trend of companies who have been using Google Apps switching to Office 365.

It’s not just Microsoft saying that Office 365 is growing (COO Kevin Turner claims that four out of five Fortune 500 companies use the service). Last year, cloud security company Bitglass said traffic analysis gave Google twice the market share of Office 365 among its customers, with 16.3 percent of the market; that went up to 22.8 percent this year as more companies switched to cloud services. However, over the same year, Office 365 grew far faster, from 7.7 percent to 25.2 percent. Google has a slight advantage with small businesses (22.8 percent to Microsoft’s 21.4 percent) but in large, regulated businesses (over 1,000 employees), Microsoft’s 30 percent share is twice that of Google and growing fast.

Office 365 is even more popular with the 21 million customers of Skyhigh Network’s cloud security services, where 87.3 percent are using Office 365 services, with each organization uploading an average 1.37 terabytes of data to the service each month.

That fits what identity management company Okta is seeing. Office 365 is the most commonly deployed application among its customers (beating even Salesforce) and adoption is growing faster than any other cloud applications. It’s also the cloud service customers use the most, probably because that usage includes all the email users send and receive.

Okta CEO Todd McKinnon does note that the picture is a little different in different parts of the world and across different industries. Google Apps is stronger in APAC, although that may change as Microsoft builds out new data centers in the region (that’s already making a difference in Australia and Japan). The only industry segments where Google Apps has more share than Office 365 are in technology; media, Internet and software companies. The smaller the company, the more share Google Apps has among Okta’s customers; but even in the smallest companies Office 365 is still in the lead.

“There are different dynamics that matter based on the company size,” McKinnon points out. “Large companies need manageability, security, reliability. You wouldn't see this acceleration of Office 365 in large companies without Microsoft doing a lot of work [in those areas].”

The majority of new Office 365 customers are moving from on-premises, but even companies that have already adopted Google Apps for Business are switching to Office. Microsoft claimed they won back 440 customers in 2013, including big names like Burger King and Campbell’s, and the trend is continuing. Some of that may be the halo effect of the Office 365 growth making companies that picked Google Apps question whether they made the right decision. But often, it’s because of dissatisfaction with Google Apps itself.

The simplicity of Gmail and Google Docs clearly appeals to some users, but as one of the most widely used applications in the world, the Office software is familiar to many. “When you put these products into companies, the user interface really matters,” McKinnon says. “For email, the user interface really matters. Google Apps is dramatically different from Office and that’s pretty jarring for people who’ve been using Outlook for a long time. It's like it beamed in from outer space; you have to use a browser, the way it does conversations and threading with labels versus folders, it's pretty jarring.”

And it’s hard to use Outlook with Google, many customers report. “Some companies, they go to Google and they think they are going to make it work with Outlook; what they find out when they start using the calendar is that it just doesn’t work as well with the Google Apps backend as it does when you’re using Office 365. The user interface is so important that it pulls them back in. Even if you like the Google backend better, you have thousands of users saying ‘what happened to my folders?’”

Buying Office 365 for Office

That’s what Glenn Jimerson, currently CTO of fintech startup Loanatik found with an earlier startup. “I’ve deployed Google Apps in three different startup and I personally like it for many reasons, including the price; it’s great bang for the buck.” But while young founders and employees, especially Mac users, were happy with Google Apps for the basic document tasks they were doing, other, older workers found they weren’t as productive without Office. “I got a lot of backlash; they weren’t happy that it wasn't Outlook. They were saying ‘I really want PowerPoint to do my presentations.’”

The tipping point was a new CEO who insisted on working in Outlook. When Jimerson looked at the options, Office 365 made more financial sense than just buying the Office software. “We would pay Google Apps $5 a month and then we'd have to buy the Office suite for each computer. If you’re pushing somebody who's used to an Office environment into a Google cloud, they're going to feel this vacuum because they no longer have the programs they're familiar with. It represents a huge investment in time that people aren't going to be receptive to. And you have Microsoft saying ‘for just $3 a month more you could have all these great programs you're used to. Now they’ve got the pricing so you get more than you get on Google, what Microsoft is offering is fantastic, and for $3 more it’s a premium worth paying. Microsoft is still the king of hill for a reason.”

The cloud aspect of Google Apps hadn’t proved important to the startup (and it wasn’t why they switched to Office 365). “Everybody was fine with the idea of the cloud but it wasn’t the primary reason; the cloud was nice to have but they didn’t necessarily see it as a productivity boost.” In fact, more employees were concerned about working offline. “What happens if there's no Internet, if I'm in a plane with no Wi-Fi, can I still work? Their first reaction is ‘I want Office for that’.”

His current company has used Office 365 from the start (“I brought up Google apps but nobody was willing to be that cheap about $3 a user,” he notes) and OneDrive is one of the most popular features “People like it; it’s taken over from sneakernet and emailing back and forth. If they need to work together, people just toss it up on OneDrive”.

Outlook and Excel features come up again and again as advantages for the companies who had made the move away from Google Apps. Erik Jewett of Skykick, who provides a service partners use to migrate customers to Office 365, hears that particularly from power users. “In Excel, there are rich capabilities that aren’t matched by Google apps.” In Outlook, calendar sharing is important, as is delegation. “Administrative assistants can manage their manager's calendar; they don't have that type of delegation with Google apps.”

Nick Espinosa, the CIO at IT consultancy BSSSi2, has helped several businesses move from Google Apps to Office 365. “Quite frankly, Google is completely outclassed by Office 365 in this arena and despite the price difference corporations who made the switch to Google Apps to save money usually end up coming back within a year. The primary driver of this appears to be Outlook integration over everything else, followed by the inability to do some advanced things that Microsoft Office excels at.”

For larger companies, this goes beyond the familiarity of Outlook into advanced features. “You can integrate Skype into Outlook, you can integrate OneDrive for Business into Outlook. It becomes essentially like a command center, and there is nothing Google gives you that does that.”

“The reason people have been moving to Google is cost,” Espinosa says. “Most companies we've seen that have decided to move to Google, it was primarily for cost savings. The say ‘we get email, we have all these things and it’s significantly less expensive than having to buy a copy of Office for everyone and hook up a mail server. But a lot of people don’t find the usability and collaboration nearly as effective as Office 365.”

Enterprise advantage

Not all companies who switch to Office 365 are using it as a cheap licencing deal for the Office applications. They also value Microsoft’s enterprise know-how.

“As a CIO, the goal is to run a balance between keeping all the employees happy and keeping the IT staff from pulling out their hair trying to centrally administer everything,” Espinosa says. “Most IT staff are very familiar with Microsoft infrastructure already. The Office 365 platform is essentially built on Active Directory (AD) and that’s integrated into most networks. Anyone that has had an Exchange server knows how to create routing, groups, calendars, collaboration…”

For many customers, Office 365 also copes better with the scale and complexity of a multinational enterprise than Google Apps. The global scale of Office 365 is an advantage to customers in government, education and regulated businesses care about where their data is and who can access it; Dr Mary Davis, the CIO of Macquarie University in Australia explains the reason for their recent switch from Google Apps to Office 365 “following a decision made by Google to move our stored data from Europe to the United States.” Microsoft’s data centers in Victoria and New South Wales fit their security and privacy concerns better, Davis says, and they’re getting faster access because the services are closer to them. She also notes that the majority of other Australian universities use Office 365 or Exchange and “many plan to ultimately move to Office 365,” which makes collaboration easier.

Google Apps didn’t cope well with scale at one large business Espinosa helped to migrate to Office 365, where they had been using Google Hangouts for online meetings. “Someone created a hangout for their meeting and they were hosting the meeting, and then another person tried to create a hangout with the same name – and they ended up being merged into the meeting. That doesn’t happen in Skype for Business.”

In that case, the mix-up was only confusing, but if confidential information was being discussed, it could have caused serious problems. “You should be able to create containers that are properly structured and secured,” says Espinosa, putting the difference down to Microsoft’s years of experience with enterprise systems. “There’s just a lot of detail in Office 365 that Google is just learning.”

Okta’s McKinnon says that goes beyond features to the whole way Google deals with businesses. “When they built Google Apps it was for consumers; the email had advertising in it. To be successful in enterprise takes a very different culture. You have to market it differently, you have to have a sales distribution organization, a support organization, different legal contracts for customers that you’re able to customize. It’s not that Google’s not capable of doing that, but it’s a different culture.”

Google’s approach to support can be frustrating, agrees Jewett. “Microsoft has been able to provide higher level of support, certainly for enterprise customers who are able to pay for dedicated customer account managers, and we hear that as a top reason to switch from customers.”

“The cut-off is if you’re if under 1,500 users they won't talk to you,” Espinosa complains. “Google should have a paid support line. We can get Microsoft 24 hours a day; in an emergency, they will get back to us in an hour. In an emergency, they’re there with us from midnight to 3 a.m., if we need them.”

The Google dead end

Reaching partners like Espinosa that many businesses turn to for IT help is critical, especially for small and medium businesses. “That’s an area where Google has been cutting back on partners,” says Jewett. “I definitely hear partners saying they used to sell Google and Microsoft has done a very effective job of flipping them from being large Google resellers to large Microsoft resellers. “

The success of Office 365 is even attracting partners who have previously specialized in Google Apps. Maarten van Dijk, owner of Dutch consultancy Digitalent, moved his company from Google Apps to Office 365 this summer, partly because of the number of consulting requests and job opportunities they were getting from customers that involved Office 365. But as an early adopter of Google apps – van Dijk had been using the service for ten years – he was also disappointed with the lack of new features. "It just didn't improve much in the last few years; I felt their development was on a dead end."

The 1TB of storage in Office 365 was appealing. The storage in Google Apps was much smaller and the company found buying more was unnecessarily complicated. And the migration has made van Dijk interested in other Microsoft cloud services that work with Office 365; he’s also considering moving their on premise virtual machines to Azure and investigating syncing their Active Directory with Azure AD.

Espinosa sees that hybrid option as a definite advantage for Microsoft. “You can add Office 365 into your local solution. You can have AD, security, everything on premise and move elements like email to Office 365.” Google offers some AD integration, he notes; “you can filter and block across a domain, you can even push Windows group policy to Chrome. But Microsoft absolutely has the advantage for running AD and replicating that into the cloud.”