As Google turns 10, enterprise success in question

Google dominates the search advertising market, but it plans to expand into enterprise software -- a move that has some analysts wary

Most computer industry companies would feel satisfied with ruling the highly lucrative and technically complex search engine advertising market -- but not Google.

As the search giant celebrates its 10th anniversary of incorporation this month, riding a years-long bonanza from its search business, it is also a scrappy underdog with lofty aspirations in the world of software for workplaces.

As such, Google, the unmatched consumer search engine champion, must compete against seasoned and formidable IT providers like Cisco, Microsoft, and IBM. This is no small undertaking, requiring a long-term commitment and heavy investments, while facing real risks.

The jury is still out on whether it's wise for Google to invest significant resources in providing software for enterprise search, office productivity, mapping, collaboration and communication.

It's estimated that about 98 percent of the company's revenue comes from consumer search advertising, making the company's Enterprise unit a small side business currently, at least from a dollar perspective.

Industry observers recommend that IT and business managers keep this in mind as a risk factor when considering buying enterprise products from Google.

Although Google maintains it is committed long term to its enterprise products, it isn't unheard of for large companies to change course and pull out of non-core businesses with little advanced notice.

The warning should be heeded particularly by CIOs in large companies contemplating a major investment in products such as the Google Apps Premier hosted communication and collaboration suite.

"I would absolutely ask that question," said Forrester analyst Rob Koplowitz. "As long as 98 percent of Google's revenue comes from other sources, this question of whether they're in [enterprise software] for the long term will always come up. This isn't their core business."

Burton Group analyst Guy Creese concurs. "In its heart of hearts, Google wants to succeed as a provider of software to large enterprises, but they haven't yet signaled that it's a do-or-die kind of thing," Creese said.

The highest-profile product in Google's Enterprise unit is Apps, whose free versions have proven very popular with individuals, small and medium-size businesses and educational institutions.

Google could have opted to just target universities and SMBs with the Standard and Education editions of Apps, generating revenue from advertising. It could also have been content to lure SMBs to the Premier version, which is a very affordable option at $50 per user per year, when compared to Microsoft Office and Exchange.

"The things preventing Google from being attractive to enterprises aren't necessarily big issues for SMBs," Creese said.

Google could rake in robust revenue from SMBs, which are often underserved by major vendors and hold off on purchasing IT products that they need but aren't priced right for them, Koplowitz said. "There's a lot of money to be made there," he said.

This accounts for much of the success Google has had with its Search Appliance and Google Mini, which have disrupted the enterprise search market, where systems have traditionally been pricey and complicated to install, manage, and use. Priced aggressively and built with a low-maintenance, plug-and-play design, those products have hit a sweet spot with SMBs and schools.

The University of Florida in Gainsville has been using the Search Appliance since 2002 and currently has two of them to index its entire public Web presence -- from its main site to individual college and department sites and Web servers from specific research teams.

"The appliance has always been easy to set up and maintain. The administrative interface gives a very clear overview of how the appliance sees your Web sites, and makes it easy to update the index," said Daniel Westermann-Clark, Web developer at the university.

According to Google, more than 500,000 organizations have signed up for Google Apps, totaling more than 10 million end users, of which "hundreds of thousands" are using Premier.

However, Google has made it clear it has its sights set on large companies as well, recently releasing a newly architected version of the Search Appliance that can index more than three times as many documents as the current model and improves the product's IT management functions.

But it's the Apps Premier expectations that are riding particularly high. As CIOs warm up to the SaaS (software-as-a-service) approach of application delivery as an option to the traditional on-premise model, Google sees a big opportunity to take business away from Microsoft's Office/Exchange and from IBM's Notes/Domino and rake in big bucks.

In fact, a big motivation behind Google's development of Chrome, a major two-year project involving significant investment, was to create a browser optimized for next-generation Web applications like the ones in Apps Premier.

Google is far from alone, as Yahoo's Zimbra, Cisco's WebEx, Zoho, and others beef up their own hosted collaboration and communication suites, while Microsoft and IBM are taking steps to protect their turf.

In its enterprise aspirations, Google has other disadvantages. Unlike Cisco, Microsoft, IBM, and Salesforce.com, Google doesn't have a large list of enterprise clients, nor does it have as much experience courting CIOs and catering to their requirements, including prompt, individual attention throughout a product's lifecycle.

While Google has strengthened Apps Premier's IT control features, particularly with its purchase of e-mail security and management expert Postini, the suite still lacks features that large enterprises often require. For example, Google only offers an uptime guarantee for Gmail, not for the other components, and the company admits that the feature set of its applications lags behind Office's Word, Excel, and PowerPoint, while Apps' calendaring and contact management features are often cited as weak. Apps has only partial support for offline access to its applications, a popular request.

"Google hasn't been able to put together a set of features that are important enough to enterprises to make them shift," Creese says.

Thus, CIOs aren't rushing to adopt Apps Premier, and those who decide to deploy it are opting to do so for a limited set of users and for operations that aren't critical to the business. This is true even among CIOs who have embraced SaaS applications as viable alternatives to on-premise software.

Health-care company The Schumacher Group has used hosted applications successfully for well over two years from vendors such as Salesforce.com and Oracle's PeopleSoft, and is now about to deploy Apps Premier, but not as a replacement to its Exchange/Office environment, which its about 750 full-time employees use.

Instead, The Schumacher Group, which provides management services for hospital emergency rooms, plans to buy Apps Premier licenses for the about 2,400 physicians and nurses that it works with as independent contractors.

"We'll use Apps Premier to create an environment that doesn't exist now, but as far as replacing Exchange and Office, we're not at that level yet," said The Schumacher Group CIO Douglas Menefee.

Part of the problem is that Apps Premier can't meet the company's regulatory compliance requirements for handling patient data, Menefee said. However, it looks like a good option to provide e-mail, calendar and office collaboration software at a low cost and in a convenient hosted manner to these doctors and nurses, he said.

The decision to go with Apps Premier, as opposed to another hosted option, is 99 percent certain, barring any architectural problems that might prevent the users from accessing the software through the hospitals' networks. A pilot phase with portion of the doctors may start in about a month, he said.

And so as Google celebrates its 10th birthday and its unquestionable dominance of the search engine ad market, which has propelled it to stratospheric financial success, it looks at a major challenge and unanswered questions in enterprise software.

"It's hard to break into the enterprise business," Koplowitz said. "Will Google sign those big customers that represent big revenue and continued investment in this area? Google certainly can afford it, but that doesn't mean they won't decide to refocus their resources in their core business. That's definitely a fair question to ask of Google. I don't think Google is having cold feet yet but time will tell if they're in this for the long term."

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