April 19, 2017
Holden Page is a Crunchbase News editor and columnist.
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While where we work may be changing, how we get work done still looks like the past—at least through the lens of Google and Microsoft’s productivity suite dominance.

Google hasn’t yet matched Microsoft’s persistent hegemony in productivity apps, but the two form a working duopoly. And, notably, Microsoft has managed a reasonable transition from licensed software sales to selling Office as a service.

But while older tech companies still rule the productivity app roost, there are up-and-coming contenders. So which startups are ready to step to the plate and take a shot at breaking off a piece of Microsoft massive profits?

Startups Make Office Suites Too

At one point, Google maintained a lead in cloud-based office suite offerings, with 16 percent market share in 2014 vs. Office 365’s 8 percent market share. But the tables have turned since then, when it looked like Google could actually seriously threaten Microsoft’s stranglehold on the Office market.

According to a 2016 Cloud Adoption EMEA report by Bitglass, which analyzed 8,000 European firms, Office 365 now maintains a significant lead in enterprise, with 43 percent market share—nearly double the G Suite platform, which sits at an adoption rate of 22 percent. These numbers, per the report, go down worldwide for Office 365, with adoption sitting at 34.8 percent. In the same vein, G Suite adoption rate among enterprises levels up to 24.5 percent.

As we have seen with Google, which had a headstart in offering cloud-based productivity applications, competing against Office’s legacy difficult. In fact, Google has given up convincing enterprise customers to ditch Office. That goes to show how entrenched brands of productivity apps can be in workplaces around the world. Therefore, Microsoft still retains billions of dollars in yearly profits from its sales of Office—a large prize to anyone who can take away even a portion of the winnings.

But it won’t be easily won. For startups, it’s an uphill battle. Yet it’s a battle that, for some, is worth it. Here are the startups who are attempting to take their share of the Office suite pie.

Zoho

Startup or not, Zoho was among the first cloud-based providers of software. And, as player in the productivity suite space, it competed directly with Google’s previously-nascent efforts to build productivity apps for the web. Zoho was also far ahead of Microsoft’s own cloud offerings in the space. Its product offerings include Zoho Writer, Sheets, and Show, which compete directly with constituent apps of Office suite, as well as a number of other cloud-based applications.

In an interesting twist, the privately-held company has never raised VC funding, preferring to bootstrap its way to profitability. But that doesn’t mean Zoho has stayed out of the investment scene completely. According to Crunchbase data, Zoho has lead a seed round in Zentron Labs, which automates manufacturing processes, and it participated in Zenedge’s $6.2 million Series C.

Whether the company’s insistence that it keep outside funding at bay limited Zoho’s growth is hard to determine. Zoho is certainly an arms-length away from seriously competing with either Office 365 or G Suite, despite its initial advantage. According to HG Data, nearly 15,000 companies use Zoho with a 18.5 percent. Office 365, on the other hand, is measured to have nearly 147,300 customers.

Quip

Founded by Bret Taylor, Facebook’s former CTO, Quip is “a living document platform” where teams can collaborate over docs and spreadsheets.

At one point, the company’s main competitive offering was being a mobile-friendly word-processing app. And according to TechCrunch’s report, Bret Taylor considered Google Apps (now G Suite) and Microsoft Office as its main competitors:

“Microsoft Office is exceptional for individual users and working offline on the desktop version,” Bret Taylor told Techcrunch. “But Word is not good for collaboration, with most document sharing happening as attachments to email. Most just go straight to email and skip Word altogether.”

In its effort to improve mobile collaboration in productivity suite space, the company raised a $15 million Series A and a $30 million Series B, with Benchmark and Greylock Partners respectively taking the lead. And after a couple years of going it alone, Quip exited in a $750 million dollar sale to Salesforce. Notably, Marc Benioff, CEO of Salesforce, was a participant in Quip’s Series A.

The company continues to operate under its own brand, and the purchase by Salesforce signifies its ambitions to move beyond its lucrative CRM product.

Open-Xchange

Open source office productivity apps do not have the best track record when it comes to competing with incumbents. But that hasn’t stopped Open-Xchange (OX) from offering its own open-source software-as-a-service productivity suite.

Targeted to telecommunications and hosting companies, OX offers white-labeled cloud-based email, word processing, presentation, and file storage apps. Essentially, OX enables hosting companies to offer their own branded suite of office applications.

It’s a strategy that has attracted interest from investors. OX has raised $43 million from investors, with its last round being a Series C raised to the tune of $5.2 million. The company has also merged with Dovecot, which provides open-source IMAP software. According to a company press release in February 2017, Dovecot’s IMAP server market share is at 72 percent with over 4 million server installs.

Unicorns Are Also Dipping a Toe Into Productivity Suites

While the above mentioned startups are nearly 100 percent focused on offering productivity suites intended to compete with Office 365 and G Suite, unicorns Dropbox and Slack are aware of the opportunity.

Dropbox, a popular cloud storage company, has released its own document editing software called Paper—following the company’s acquisition of Hackpad. While Paper is an interesting product, it’s very unlikely an enterprise company would consider it a serious word processing application worthy of replacing G Suite, much less Office 365.

Slack, on the other hand, has also taken strides to make its inline posts feature more robust. The move is not an overt ploy to get users to ditch G Suite or Office 365. But as competition among SaaS-fueled enterprise messaging apps gets more heated, and as partners turn into serious contenders in the messaging space, expanding Slack to include more standard productivity apps is not out of the realm of possibility.

Rooting Out Incumbents Costs Money, Time, And Patience

It looks unlikely that a startup will successfully compete with G Suite or Office 365 any time soon.

Both offerings come with support and product options that cannot easily be matched by a scrappy startup. And in the case of Office 365, startups will have to contend with decades of inherited institutional trust, experience, and training. With such a barrier to entry, a new productivity suite would need to be incredibly innovative, or incredibly well-funded, to raise the ire of Google or Microsoft.

For now, the future of workflows in organizations around the world will likely center around Google or Microsoft’s suite of productivity apps. And while the burden of entry is high for a startup to compete, the startup that does manage to do so will likely reap huge rewards for its efforts.