It appears as if the cloud wars are not about to let up any time soon. Microsoft (NASDAQ: MSFT) announced drastic price cuts for the lower tiers of OneDrive on June 23, 2014, and increased free storage allocation from 7GB to 15GB. I penned an article describing how the price cuts, and increase in free storage allocation, appeared not only aimed at matching Google's (NASDAQ:GOOG) (NASDAQ:GOOGL) Drive prices, but also designed to help OneDrive catch some of the migrating Ubuntu One users, which was shut down in early June. Microsoft had earlier pointed out that it increased the free allocation to cover 75% of OneDrive users with 15GB of data, or less.
Google responded to Microsoft's move less than two days later by removing more barriers to enterprise adoption of Google Apps. The company introduced new storage pricing, extra mobile features, enhanced editing features, and improved migration tools for Google Drive. Google dubbed its latest enterprise offerings ''Google Apps Unlimited'' and ''Google Drive for Work,'' although it's essentially one service with two different names.
Google Apps Unlimited includes all the low-tier, $5 per month features of Google Apps for Business such as Gmail, Sheets, Docs, Slides, and Sites, but will now offer unlimited storage, up from 30GB free storage space, which trumps Microsoft's 1TB of free storage for Office 365 subscribers.
What does this mean for Google Drive users?
The potential cost savings for Google Drive for Business users is quite huge. Companies that have been paying for Apps for Business, Google Vault, and an extra terabyte of storage will now see their monthly bills fall by 50%, and get a bonus of unlimited storage. Users that had only subscribed to Apps for Business and purchased an extra terabyte of data, but have not subscribed to Google Vault, will see their bills fall by 33%. The only caveat for the new service is that plans with fewer than five users will have their storage space allocation capped at 1TB per user.
Microsoft still wins in enterprise
The new pricing structure for Google Apps Unlimited appears to be very competitive. Comparable offerings by popular services such as Box and Dropbox also offer unlimited storage, but cost $15 per user per month, and require a minimum of five users. Google, however, might face an uphill climb trying to prise business users from the highly dominant Windows ecosystem. Windows is still the most dominant OS for PCs by far, and commands more than 90% market share. Despite the ubiquity of the tablet, PCs still call the shots in the office.
OneDrive is closely tied to Microsoft Office, and works seamlessly with Windows devices. Microsoft recently introduced Office for iPad in an attempt to bridge the gap between the PC and the iPad -- one of the world's most popular tablets. Additionally, OneDrive has mobile apps for Windows Phone, iOS, and Android, making it attractive for over 90% of mobile phone users who rely on the three dominant OSes. It would be hard to imagine large enterprises with Windows-based systems shifting their workloads from OneDrive to Google Drive on account of its competitive pricing.
But, Google Drive still has plenty of potential to become the go-to cloud storage for smaller business users with lighter workloads. Users with Google accounts can readily access Google Drive. Additionally, Google Drive works perfectly with Google's web-based Chrome OS. Chromebooks have become very prevalent -- 21% of all low-cost laptops sold in the U.S. today are Chromebooks. Google Drive also works with Android and iOS apps.
Google Drive had 120 million users as of October 2013, just 18 months after its launch. Meanwhile, OneDrive had 250 million users by mid-2013 (the drive was known as SkyDrive back then). Microsoft and Google have not issued official updates this year regarding the current number of users for their respective drives. Windows Azure has been growing at a blistering pace, and grew at a CAGR of 154% in the third-quarter of fiscal 2014 (Microsoft's fiscal year ends on June 30). This might imply that the number of OneDrive users could have reached 350 million, or more, by now.
Microsoft recently revealed that 75% of OneDrive users had 15GB of data or less, meaning that these are, essentially, non-paying users. The 25% of paying OneDrive customers translates to about 87 million users. Assuming that 80% of these users fall under the first price tier, and the remaining 20% mainly fall under the second tier, Microsoft might realize revenue of $2.5 billion, or 3.5% of its overall fiscal 2014 revenue, from OneDrive.
Google has never divulged the details of how many of its users are paying customers. But, assuming that Google Drive is structured similarly to OneDrive, Google might realize revenue of $2 billion, or 3.5% of its overall fiscal 2014 revenue, from Google Drive.
Foolish bottom line
Google has introduced highly competitive pricing and features for Google Drive for Business. But, the dominance of the Windows ecosystem gives OneDrive a huge edge in enterprise. Google Drive can, however, still win over a lot of smaller business users.
Joseph Gacinga has no position in any stocks mentioned. The Motley Fool recommends Google (A shares) and Google (C shares). The Motley Fool owns shares of Google (A shares), Google (C shares), and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.