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Is Google Going Too Far?

I've been watching the internet giant Google for a while and I think they're trying to jump into every corner o the IT industry. We mostly know Google [or Goggles as some people know it] for it's search feature and we web developers / designers crave a good Google PageRank for our homepages.

Here's an excerpt from Yahoo News, and while I do not necessarily agree with everything Tim Beyers says, some points he raised are well worth noting:

Once again, Google (Nasdaq: GOOG - News) is out to prove conventional wisdom wrong. According to a story published in today's edition of The New York Times, Big Goo builds its own servers and could even get into the business of creating its own chip designs.

There's already plenty of hubbub over whether these initiatives will be good for the company or the industry at large. I have my opinions, but I'm loath to share them. I believe doing so would detract from the larger issue at hand -- namely, that Google has dramatically altered the competitive dynamics in its industry. And that may prove to be really, really bad.

At issue is how many competitors Google has gained in recent months. Here's how it looks now, assuming that server and chip vendors have officially joined the list:

SearchWeb AccessPortals

Yahoo! Earthlink Yahoo!

Microsoft United Online Microsoft

AOL Yahoo! AOL

Microsoft

Productivity

SoftwareServersChips

Microsoft Hewlett-Packard Intel

Sun Dell AMD

IBM Sun Freescale

IBM

Rackable Systems

What's more, this compilation isn't even close to complete. Dozens of private companies are competing in areas where Google wants to be or already is. Yet, when combined, these firms alone possess more than $34 billion in net cash. Compare that with Google, which has raised two rounds of funding in recent months, giving it roughly $8.4 billion in the bank as of this writing.

Here's my point: As rich as Google is, it may be woefully underfunded for taking on 90% or more of the tech universe. Yet that's what it seems to have planned. It's as if Google wants to build a tech infrastructure so big and impressive that no company will ever want to have an infrastructure of its own. Just outsource your Web applications to us, Google's pitch might read.

That would be an indirect assault on not only Intel (Nasdaq: INTC - News) and Advanced Micro Devices (NYSE: AMD - News), but also on every server vendor, including server-software vendors such as Red Hat (Nasdaq: RHAT - News), Sun Microsystems (Nasdaq: SUNW - News), and IBM (NYSE: IBM - News). After all, who needs servers when everything is uploaded to Big Goo?

History hasn't been kind to do-it-yourself tech firms. 1980's-era Bob Vilas such as Sun have since dumped most vertical-integration strategies to make room for the cost-efficiency that comes from working with partners. Now, Google wants to rewind the clock. I, for one, don't see it working out well.

I have quoted the article in it's entirety because it's short but my source is http://news.yahoo.com/s/fool/20060703/bs_fool_fool/115194956316.

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