Can Google Apps Move up Market?

Although Google always seems to be up to something, the past few months have seen a flurry of activity in a space long associated with IT: Google has driven its cloud computing applications -- Google Apps -- into businesses.

Now Google wants to move up market and become an enterprise player. For example, it has announced enterprise editions of its Google Apps, and has 600 employees across sales, support, engineering, marketing, and product management dedicated to enterprise products at Google.

But the road to the enterprise is fraught with pitfalls. Big companies are infamous for long software sales cycles and averse to newfangled technology such as cloud computing. Requirements run the gamut, from security to compliance, manageability to support. And, of course, Google is on a collision course with Microsoft in the cloud.

The one sure bet: Despite Google's recent rush to bring new products and functionality up market, "Google Apps has a long way to go," says Phil Shih, analyst with Tier 1 Research. "I don't see them being anywhere near enterprise-ready."

[ Learn more about the new breed of utility computing and platform-as-a-service offerings. ]

Google Apps is a bunch of free software with very limited functionality hosted at Google's datacenters and accessible over the Internet. The suite includes Gmail, which receives revenue from advertising; Google Calendar, which lets users share a calendar; Google Talk, for free text and voice calling; and Google Docs, for document creation and collaboration.

Many consider Web-based Google Apps to be a challenge to Microsoft Office on the desktop, although market comparisons today are hardly fair. Google claims more than 500,000 companies have signed up for Google Apps, but Gartner analyst Tom Austin figures only a handful of employees at each company uses the tools. Given Microsoft Office's 500 million users, he says, "it's a raindrop."

"In a two-year planning horizon, I don't think anybody is going to confuse Google Apps with Microsoft Office," Austin says. "Google is trying to outflank Microsoft Office, not undercut it." Basically, Google's plan is to exploit Microsoft's weaknesses in the cloud by offering simple, collaborative Web applications (and related files) that are used alongside feature-rich, somewhat restricted Microsoft Office applications (and related files) on the individual desktop.

Google Enters the Business World

Four years ago, Google began riding the cloud computing wave into the backwaters of businesses by offering a piece of its heralded search-engine technology for corporate Web sites. The success of that product showed Google that it could make a splash in businesses, and thus Google rapidly expanded a business line of plain-Jane software services. 

Google Apps has held a kind of grassroots appeal for workers fed up with their IT department's sluggish responses to their requests. These workers wanted to tap free collaboration applications over the Internet, while skirting draconian IT policies. Indeed, employees across the board have been taking control of IT.

Thus, Google has enjoyed a surge, mostly within small and midsized companies. As Google Apps took hold inside cubicles, CTOs had to find ways to support the software or else ban it. Gartner's Austin says last year he fielded a rising tide of telephone calls from clients wanting to know more about Google Apps. According to TechCrunch, Google Apps earned about $400 million in 2007.

Google, too, saw the signs and ramped up efforts to make Google Apps more business-friendly. In summer 2007, Google bought Postini for $625 million -- the company's third-largest acquisition. Postini brings policy, security, and compliance rules to e-mail and the Web, a critical feature for large companies looking to leverage cloud-based computing applications. "We've taken a lot of [Postini's] functionality and integrated it with Google Apps over the last six months," says Rajen Sheth, senior product manager for Google Apps.

Earlier this year, Google's pitch hit a crescendo. It came out with a host of new products: Google Web Security for Enterprise, which uses Postini technology, and Google Sites for people to create a "team" Web site. Most notably, in late February, Google announced Google Apps Team Edition, which aims to give administrators visibility into Google Apps usage at their companies, as well as the ability to exert some control -- a sure sign that Google wanted to court big companies.

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