Google: Enterprise business profitable; Says email migration 'proof points' building

Google Enterprise president Dave Girouard said the search giant's corporate apps business is small potatoes relative to advertising, but has "a few 100 million dollars" in revenue and is "profitable and growing." Meanwhile, Girouard said Google Apps is getting a solid pipeline of "proof points" of large enterprises moving to Google's cloud-based email and calendar services.

Google Enterprise president Dave Girouard said the search giant's corporate apps business is small potatoes relative to advertising, but has "a few 100 million dollars" in revenue and is "profitable and growing." Meanwhile, Girouard said Google Apps is getting a solid pipeline of "proof points" of large enterprises moving to Google's cloud-based email and calendar services. 

Girouard's talk, delivered at the Bank of America U.S. Technology conference Thursday, was notable on a few fronts:

  • It was a rare dose of color from Google on the Apps business and profitability (Google Apps won't drive the search giant's top and bottom lines until at least 2011);
  • Girouard acknowledged that Google Apps isn't a replacement for Microsoft Office and that the migration decision is mostly based on email;
  • And Girouard said that Google is winning enterprises over one at a time. "I'm looking to build a large business over time," said Girouard. "We believe we can be a first tier player in IT." 

 

First, the profitability. Girouard said that Google Enterprise is profitable charging large customers $50 a user for email and calendar services. Why? Google Apps uses the search giant's existing architecture. It doesn't have separate data centers. In fact, Google Enterprise only uses a smidge of the company's storage and bandwidth capacity. 

Girouard said Google doesn't "run separate infrastructure for my business. We don't have separate data centers and allocating jobs is shared. Truthfully, the enterprise side is tiny fraction of storage and bandwidth. We get low costs. Enterprise is not driving cap-ex spend. We're benefiting from it all."

That scale is one of the reasons Google Apps is getting traction in the enterprise. However, Girouard noted that the business case for Google Apps for now rests solely on email and calendar services. Google's other enterprise offerings, like spreadsheets and docs need to improve. Girouard said other parts of the Google Apps suite will be vastly improved in a year. 

For now, just saving on email is enticing enterprises to give Google a spin. Girouard said:

The recession is difficult on IT and all of them (CIOs) are being asked to cut their budgets. In the Google Apps business, we're seeing an acceleration. A lot of companies looking at this for a long time and reducing servers, licenses and data center space is appealing.

On the cost front, Girouard acknowledged that pinning down the exact cost savings of Google's cloud email compared to Microsoft Exchange is difficult, but he noted that the search giant can be anywhere from 5 times to 20 times less expensive. One Google customer put the savings at $400 to $1,200 an employee. 

What Google is trying to do is use email and calendar to get in the enterprise door and then try and gain more wallet share. Girouard said that "Gmail and Calendar is what's driving Google Apps." Other parts of the suite "have a ways to go." Girouard said those additional products are getting a lot of usage, but are not Office replacements. Google Sites is being well received in the enterprise. "We understand and appreciate that we have more work to do," said Girouard.

Add it up and Google sees its enterprise entry as a long project. "We're starting to get proof points that we can move big companies to Google Apps. As these proof points are coming out more companies are saying 'this might be right for us,'" he said. 

To wit:

"Every few weeks a company of that scale is moving 100 percent to Google. I wish it were 10 times that amount, but we're doing them one by one," said Girouard. 

However, Girouard said that large enterprises are still skittish about security and hosting data in the cloud. The companies that do go with Google Apps don't go back. "We're not going to win every battle," he said.

Other odds and ends:

Girouard chafed over the way the term cloud computing was being tossed around. "Many big vendors are just relabeling what they were doing 5 years ago (as cloud computing)," he said, adding that many of these companies are just pitching more efficient data centers. So what are the real cloud players? Girouard said it's a small set that includes Amazon, Salesforce.com and Google. "I don't think there are others doing it at scale," said Girouard. 

In addition, Girouard provided a cloud computing litmus test: "We spend cap-ex so our customers can spend a very a little amount of op-ex. If you're doing an upfront buildout it's not cloud."

Google is doing more product development and integration with Salesforce.com. On technical side, we continue to show these products can work together. On the business side, the overlap of big companies using both Salesforce.com and Google is growing, said Girouard. “Increasingly, I’m seeing an overlap in the customer base,” he said. 

Google doesn't have plans to expand into larger scale enterprise apps. Girouard said that Google doesn’t plan to get into the CRM and ERP markets since it has "no special expertise" in creating such applications.

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