Starbucks and Google: Not so grande for AT&T

The news last week that Google had bested AT&T to provide free wireless service at 7,000 Starbucks didn’t really make much of a ripple in the government market.

I think it is worth paying attention to, though. It is another sign of the evolving nature of the competitive landscape, especially when you combine it with Amazon taking on IBM Corp. on the $600 million CIA cloud contract.

AT&T has been providing the wireless service at Starbucks for several years, but the coffee company is dropping AT&T in favor of Google.

Companies like Amazon and Google rose to prominence by being early movers in new market segments: e-commerce for Amazon and search for Google. They built huge, lucrative businesses in those areas, but were always hungry for more.

The cloud was the first move beyond their base, and the two compete against each other in that arena, but now they’ve expanded their universe, and are competing against more traditional players.

Amazon versus IBM and Google versus AT&T are just the latest examples of this. It is noteworthy that Google is partnering with Level 3 Communications on the Starbucks project; Level 3 has a well-established government business via the Networx contract, so it would be surprising to see them working together to make inroads together in public sector.

The challenge for established players in the government market is how to counter the “coolness” factor when competing with an Amazon or Google, who rightly or wrongly are seen as more cutting edge and innovative than the average government contractor.

At the same time, there is an opportunity, especially for small and mid-tier companies, to partner with the likes of Amazon or Google and grab some of their star power.

Large companies should be on notice; Amazon and Google are here, and they want your business.