FORTUNE Small Business

Is Google's free ride as fast as Vista?

Find out which new productivity software suite is best for your needs.

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(FSB magazine) -- How's this for irony? Choosing the software that's supposed to make our work lives easier is becoming horribly complex. Market hegemon Microsoft recently unleashed its most impressive riffs yet on Word, Excel, PowerPoint, and the rest, packaged as Office 2007 and built for the new Vista operating system. Meanwhile, Internet search-giant Google has come to market with a reliable and low-cost suite of web-based tools: word processing, spreadsheets, calendar, e-mail, and more, all packaged as Google Apps.

Smaller players have entered the fray as well. Start-ups such as Zoho (zoho.com) and ThinkFree (thinkfree.com) are plying web-based office software. Golden oldie Corel is beta-testing a partly web-based, partly shrink-wrapped offering called WordPerfect Lightning (corel.com). And open-source applications such as OpenOffice (openoffice.org)-as well as its commercial cousin StarOffice (sun.com)-are sporting fresh, if clunky, upgrades.

But for my money the choice really comes down to Google Apps and Office 2007. They have the most resources, the best features, and the brightest prospects. To get a sense of how both products serve small business, I've spent the past six months testing them here at Strange New World Radio (snwradio.com), a small media shop that produces technology reviews for print, radio, and TV.

My verdict: If money is not an issue and you need to turn out dazzling presentations and spreadsheets, go with Office 2007. If collaboration is important to your business and you don't need to produce slick documents or do complex financial analysis, try the far less expensive Google Apps.

Compare Google Apps and Microsoft Vista

Basic versions of Google Apps are free and feature-packed, if you don't mind limited storage capability and customer support. Premium packages cost all of $50 a year for one seat. Google's software-as-a-service model offers a beguiling promise: Sign up and you will never have to face another Microsoft upgrade or crash. And you can access your stuff from any computer with an Internet connection. To get started, just surf over to google.com/a, create an account, struggle a bit to master Google's retro-hip white interface, and-poof!-you've got Google Apps. There are no downloads, backups, or new hardware to deal with.

In my tests Google Apps provided a significant productivity boost by letting remote colleagues work together on shared documents. My radio show co-host, Dan Evans, and I now use Google Apps exclusively to create our scripts. I open a Google document and invite Dan in using the "share" tab. Then we use AOL Instant Messenger to chat as we work. No more - e-mailing Word documents back and forth, or even talking on the phone. What used to take an hour now gets done in about 40 minutes.

However, don't underestimate the challenges of learning Google Apps. Most functions are either laid out differently from the familiar Office commands or are in a different place. Edit is a tab. Save is a button. Although Google Apps is web-based, the clipboard-where you store data during short-term transfers between documents or applications-is still on your computer. So cutting and pasting can be inhibited depending on security settings and other network factors. Google does a nice job of saving versions of text, but if you are collaborating with several people, expect at least some of your stuff to be lost as your saves conflict with those of others. It took Dan and me several walk-throughs to get the hang of it, and we are hard-core tech nerds.

The system is entirely web-based, so you can't work without a web connection. (Google says it's working on desktop versions of its applications, but nothing is close to market.) Editing Office documents in Google Apps (and vice versa) is strictly a cut-and-paste affair. And I worried about data security, considering that Google's privacy policies have recently been scrutinized by the EU and the British privacy watchdog Privacy International (privacyinternational.org). The latter flunked Google in a scathing June report on data confidentiality at big Internet companies.

Comment on Google Apps and Office 2007

SF Bay Pediatrics, a medical practice with 24 employees and offices in San Francisco and Mill Valley, Calif. (sfbaypediatrics.com), has been using Google Apps since the beginning of the year. Over the next four years SF Bay tech czar Andrew Johnson is budgeting $4,800 to license Google Apps for all 24 employees. That's it: Support comes with the license, and there are no hardware or software upgrade costs to worry about. Using Office 2007 for the same period would cost SF Bay $41,091, including licensing, support, and upgrades. SF Bay's tech-savvy medical professionals have found it easy to make the switch, and, says Johnson, 27, "I'm not committed. I don't have to spend myself out of a hole to stop using Google."

Office 2007 works well and looks cool. If you pony up for the full version of -Microsoft Office Professional 2007 and run it on a new PC with at least two gigs of memory and a 1.8 GHz processor, you'll be rewarded with an unprecedented -array of features. The new Business Contact Manager stands up well against far more expensive customer-relationship-management applications. Excel 2007 has been transformed from a mere ledger and modeling tool to a presentation and calculation marvel, delivering no-nonsense database functionality on a par with Oracle and other industry leaders. The new versions of PowerPoint and Publisher are also much improved, offering pro-level graphics manipulation along the lines of Quark or Illustrator.

Tom Gordon runs River Bend Marketing, a six-employee consultancy in Battle Creek, Mich., that bills more than $750,000 a year. Gordon, 61, has been using Office software for many years. He upgraded to Office 2007 in February and estimates that he saves $25,000 to $30,000 annually by using Business Contact Manager and Office Accounting to track hours and manage receivables. Says Gordon: "I go to my accountant only once a year now, to do my taxes, instead of paying him to do my billing once a month."

And now the caveats: It can be hard to find logic in Office's sprawling feature set. In Outlook your "contacts" are different from your "business contacts." Outlook "lists" sometimes flow into Business Contact Manager. Sometimes they don't. Projections and charts in Excel don't match similar features in Contact Manager. Then there are the compatibility problems. Microsoft doesn't support Adobe formats such as PDF and Acrobat; you must download plug-ins to view these by-now-standard files. Business Contact Manager offers cool tools such as sales projections generated directly from invoices and e-mails. But I couldn't use them easily because Microsoft doesn't play well with Intuit's QuickBooks, where all my financial data reside. Grrr!

The bottom line? Google Apps is worth a shot if you need to save money and if fancy formatting and sophisticated number crunching aren't your top priorities. But if slick presentations and high-level data manipulation are key to your success, stick with Office 2007. Google's web-based software may be the future, but for now most entrepreneurs are probably better off living in the present.  To top of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.