Come on down, Google Apps, the price is right

Come on down, Google Apps, the price is right

Summary: I think the BBC hit the right note with its headline today on the launch of Google Apps Premier Edition: Google charges for web programs. Today may go down in history as the day when Google started charging for applications.

TOPICS: Google

I think the BBC hit the right note with its headline today on the launch of Google Apps Premier Edition: Google charges for web programs. Today may go down in history as the day when Google started charging for applications. Suddenly, it's once again become acceptable to charge customers for using Web-hosted software. It's as if the dot-com era never happened.

Google Apps logoI heard indirectly that my article of a couple of weeks ago, Three mega traps for Google Apps, had not been well received in the Googleplex. By comparison with most bloggers, I have privileged access to Google PR, since a good friend of mine happens to be married to someone who works in the company's in-house PR team. My friend happened to be in London the other day and passed on a message from his spouse that I had gravely misrepresented Google's commitment to the subscription model. (What joy I felt to be just a single degree of separation away from direct communication with Google's PR team!) As my friend pointed out, adding a second source of income in addition to its core advertising revenue stream is actually a fairly sensible business move (he's a business journalist himself so I couldn't fault the argument). Google has every incentive to make a success of its foray into subscription charging, thus reducing its exposure to the vagaries of the online contextual advertising market.

So let's dispose of the first of the three mega traps I had cited in that article, and accept that the subscription revenue model is indeed strategic for Google. That leaves items two and three to deal with.

First, item three. I'd raised the spectre of Google Apps falling over, and we now know that the Premium Edition comes with a service level agreement that guarantees the service will be out of action no more than 0.1 percent of the time — just three-quarters of an hour — each month, which is not bad. Or at least, so we are told. Unfortunately, as my ZDNet colleague Larry Dignan discovered earlier today, the URL where customers can consult the details of the agreement returns a 404 error. But Donna Bogatin has been delving into the Gmail agreement, which says that in the event of downtime going above 0.1 percent, Google will credit you with three days extra service, provided you put in a claim for the disruption. It would be even better, as Dan Farber says, if Google had an online monitor like's, which provides transparency about its server uptime, but then on the other hand doesn't publish an SLA, so it seems you can never have everything you want in the on-demand world.

The remaining item is the pricing. Will this trip Google up? Actually, I think the interesting thing here is that Google has set a very sustainable pricing level. At first glance, $50 per user per year sounds very cheap, but multiply it over the three-year minimum lifetime of a perpetual license and you're already up to $150, which is probably not far off the discounted price most decent-sized enterprises pay for Office. Of course Google has to run the infrastructure as well but the feature set of the current suite it's offering is fairly limited. That leaves open the option of adding additional pricing levels for more richly featured versions, which is exactly what Salesforce and many other on-demand operators have done over the years. So I think Google Apps will remain profitable at that level, and won't undermine the profitability of other on-demand vendors.

So far so good. What of the threat to Microsoft? This seems to be the question everyone is asking about. Well, I don't see this eating into Microsoft's core Office user base, not until the functionality improves closer to parity, which will take a year or two yet. Several people have commented that Microsoft's customers will be able to use Google Apps as a negotiating ploy to get better prices out of Microsoft. But then customers have already been using OpenOffice in exactly the same way (and probably with more conviction).

I think where it does create problems for Microsoft is around the periphery, chipping away at the perceived dominance that hitherto has made Office pretty much a no-brainer purchase in a business environment. Customers will now think twice whether they really need to stump up the full cost of Office when they can make do with Google Apps or some other alternative. A lot of the early adoptions will be tactical, short-term implementations that will gradually and imperceptibly turn into long-term commmitments. Ultimately, if Google Apps can insinuate itself into replacing Microsoft Office as the no-brainer, don't-have-to-think-about-it option, then that is when Microsoft will really have something to worry about.

Topic: Google

Phil Wainewright

About Phil Wainewright

Since 1998, Phil Wainewright has been a thought leader in cloud computing as a blogger, analyst and consultant.

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  • There is no price for privacy

    First Google stores all your searches on their servers. Then they store all your emails. Perhaps your calendar. And now you want to give them all your documents and spreadsheets. Oh, I forgot all your contacts. Do you really trust anybody that much? Not at any price!
    • The seedy local MS reps maintaining your emal server are about 100x worse.

      Also, small and medium businesses can NOT afford to take all of the steps really needed to protect themselves from hacks. Google will have privacy agreements, and they have very deep pockets. If they do not respect privacy, they will open themselves up to some very hefty lawsuits.
    • Another thing, you seem to forget that Google is the ONLY one that refused

      to hand search data over to the feds. The others were tripping all over themselves to be the first to give the data to our bungling president.
      • GOOGLE refused to share our info.

        Keep up the good work. The Emperor does not need to know about it's loyal
        citizens. Thank you!
        Daniel Dick
  • Ya gotta love the competition if you are an enterprise. Now, they will have

    serious OpenOffice and GoogleApps pilots running when the MS rep comes a knocking looking to renew the contract. This has got to scare the beejeebies out of MS. They have to be worried about the continual addition of features to GoogleApps, the possibility that Google will offer an in-house Google server (fix the off-line problem AND make the "it's gotta be located here" crowd happy).

    But, GoogleApps is like a freight train a commin', and Microsoft is still in denial.
    • Denial? Yes, that is true.

      Though I do believe that it is you sir that is in denial.
      Many an occasion I?ve read your posts with your wildly unsubstantiated claims and find myself amused at the lengths at which you will go to ?spin? a story so as to imply that it is always Microsoft?s mistake or error, even when an article proclaims otherwise, or if the article in question has no mention or bearing on Microsoft at all.

      You tend to comment on subjects not so much out of practical knowledge, but more of a desire to see a company you dislike embarrassed. On many an occasion I see percentage numbers that you lay out in your posts that are utterly ridiculous, with assertions on how particular companies operate behind closed doors, when truly you do not sound as though you are a person in a position to know. Your statements on how a particular software product functions or does not function belies the fact that you have ever actually tried the product you complaining about. I do not get the feeling that computing in general does not permeate your life much beyond some home tinkering.

      You mentioned that Google must be trustworthy as they where the only ones ?not turning over search information to the government?. By the same logic, a drug dealer that does not want to allow inspection of the trunk of their vehicle to a law enforcement official while others do would make him or her ?trustworthy?? Could it be that the real reason Google did not comply was the fact that the general populace would actually discover what, and how much, information they actually hold about us?

      I may not be a large admirer of Microsoft?s business practices, but they most obviously do know what they are doing simply for no other reason then it is they, and not us, that are household name.

      As for the freight train analogy, that would be much too simplistic, as from all outward appearances Microsoft is back on track with products people are actually talking about again, so all indicators point to the conclusion that Microsoft is by no stretch of the imagination ?in denial?.

      Yes I do believe that the competition is good as it gives us a choice and will keep all software vendors on their toes, but the [i]freight train[/i] which is Google is slowing.

      Though the following quote from Admiral Isoroku Yamamoto may not be historically verified, the sentiment holds true about Googles entry into some of Microsoft?s domains where one must wonder if Larry Page and Sergey Brin do not sometimes wonder:

      "I fear all we have done is to awaken a sleeping giant and fill him with a terrible resolve