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Chromebook/Notebook/Tablet As A Service. On Google Competing With IBM Global Finance

So a lot of smart people have already written up the news from Google I/O this week – notably our very own Stephen O’Grady in a piece entitled Google I/O: The Android Story.

So I decided to look at something different. To try and provide some industry context, if you like.

In case you missed it Google this week announced it would soon launch its Chrome OS-based portables- or “Chromebooks”. The idea behind these machines is that they are a lightweight front end for cloud services – Chrome is Google’s browser, and Chrome OS is designed to be the lightest-weight operating system that can support a browser-based computing model. Boot in eight seconds? Of course its Linux, packaged. Chromebooks are network computers for an era when networked applications really are the norm. Chromebooks are designed to ride the HTML5 wave.

Rather than storing data on a hard disk, it will be stored in the cloud. I am not sure how well a two day outage for Blogger, a Google service, in the same week advertises the model, but stuff happens. Lets just assume Cloud computing works for now.

One of the really interesting things about the model Google is proposing is that client hardware will no longer necessarily be an asset to depreciate, rather it will be a service. Just like SaaS applications, the customer will be able to to adopt clients on demand, and turn them off accordingly. Google has announced the model will be rolled out to both schools and businesses, for $28 or $20 per user, per month for three years, respectively, with support.

So far so good. Cheap, simple, easy to maintain web clients, taking advantage of a rich cloud services ecosystem.

I was thinking about this model when it suddenly struck me – Google is effectively offering financing deals. Which put in mind of recent news from IBM about tablet financing. Weirdly I can’t find the IBM press release to point to, but tablet lease pricing will be between $20-$25 (US) per month on an average of a 2-3 year lease. IBM will of course finance laptops or notebooks too, and is vendor agnostic. It has some interesting healthcare deals for tablets in the pipeline now.

Of course, if you want to acquire hosted IBM apps for mail and collaboration – it will be happy to offer enterprises deals on LotusLive and Lotus Connections.

Its not clear how we got here, exactly, the the end game remains the same- an enterprise can now go to Google or IBM and get a next generation client infrastructure for a little over $20 a month for three years.

Its not clear the Chrome OS total cost of ownership stacks up. As Google’s own Tim Bray (on the android team) says:

Is a Chromebook, hardware and software all in and upgraded for as long as you pay $28/month, cheap or expensive? From the point of view of an organization that’s not IT-centric, seems like a real bargain. From the point of view of many mid-size IT shops, it smells like death and will thus be hotly resisted.

But I think the real kicker is perhaps a question of upfront costs, particularly as we migrate from one model to another. As Stephen notes in his post:

Of the companies that court developers, it’s difficult to conceive of one that’s more generous with hardware than Google.

Never mind developers- when you have as much cash as Google of course you’re going to consider financing your customers. This is another perspective on virtualisation… never mind the software, lets virtualise the upfront costs of hardware… But the $28 will need to come way down. Price competitive with IBM Finance and choice won’t cut it…

Categories: Google.

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7 Responses

  1. I’ve been hearing about deals in which the hardware cost is a negative. All done to sell the services. Google can’t match that price right now but give it time.

    All in all, looks like IBM and Google are more competitive than ever. Now, what about that other company that has its home here on the Pacific NW coast of North America?

    • Alex- I hear ya. I may not have spelled it out but hardware subsidisation is definitely part of the model being established. Pressure on Microsoft? of course-but then we knew that.

      One question in my mind since writing the post. The hardware partners are questionable in my mind for the enterprise market – Acer and Samsung? Not exactly the first enterprise providers to spring to mind. That is enterprises would need to be convinced of the chops of both Google *and* one of these hardware partners as strategic enterprises suppliers, two questions rather than one.

      James GovernorMay 16, 2011 @ 8:48 amReply
  2. It does seem a manufacturer like Wyse would be the better choice if they are really targeting the enterprise market with thin-clients, after all Wyse already ships what is in effect a “Browser only” desktop client to the enterprise market.

    But then Google seems be avoiding the fixed desktop market, which is odd – after all Chrome needs a network connection to be really usable.

    • @ewantoo stat. there are definitely some significant issues with the model so far.

      James GovernorMay 18, 2011 @ 9:28 amReply
  3. James, I take a different look at this. This is a deal meant for new startups and will eventually make its way into established enterprises. Think of it as a Salesforce entry compared to the Seibel based enterprises. New startups would love to invest just $300-$400 for the hardware + some networking, get a Salesforce account + avoid contracting an IT support company for the price of $28 platform support costs per month (hardware + software, drivers, etc.) + the cost of Salesforce account + the cost of Google Apps (for mail, docs, etc.) which I think is around $50 per year per user? I may be wrong. Compare this to a windows deployment. with $400 for the hardware + MSOffice license + Email hosting costs + Salesforce or other CRM costs + IT support services which blow the monthly budget on their own.

    Chrome books would not be good for all, but think of a start up company that is not in the IT field. They just use computers for accounting, emails, and basic office productivity. In the new age all these can be done on the web and with a Chrome book, the IT costs are just utility costs.

    Chrome books do have local storage but you access it via the HTML5 local storage API. These devices can do everything a SMB may need except for running legacy VB or Java based applications.

    So the future is definately shaping up to be web based. Chrome books are the type of devices that enterprises are likely to embrace. PCs / Macs will still continue to exist in places where more power / local applications are required, but on the desks of majority of the office workers there will be simple thin clients like a Chromebook.

    My 2 cents.

    Mitul AminJune 2, 2011 @ 11:07 amReply



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Continuing the Discussion

  1. […] 2011 • The Embattled Google Brand, Andrew Frank, Gartner blog, 13 May 2011 • Chromebook/Notebook/Tablet As A Service. On Google Competing With IBM Global Finance, James Governor, Red Monk, undated but probably 13 May 2011 • Do $28/Month Laptops […]