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Google Apps (Finally) Arrives: The Q&A

Call it a prophecy fulfilled. A not terribly unique or prescient prophecy, perhaps, but a prophecy nonetheless. The breadcrumbs – whether we’re talking about high visibility events like the introduction of Google Calendar, or under the radar events such as their addition of domain registrar capabilities – have been in place for years. A surprise, then, this was not.

What it is, however, is interesting. As is tradition in the face of such developments, let’s do a Q&A.

Q: First, let’s get the disclaimers out of the way.
A: Google is not a RedMonk client, while others with interests in the Office space such as IBM, Microsoft (not the Office BU, however), and Scalix are. In terms of what we run internally, we’ve been Exchange customers in the past, and are currently running a years trial of Zimbra hosted for us gratis by MACCIuS. Most of us at RedMonk have and use Gmail/Gcal/etc accounts for personal rather than business purposes, and I’ve used Google Apps for a personal account for sometime. Think that about covers it.

Q: If this isn’t a surprise, why is it so interesting?
A: Any number of reasons, but rolling them up I’d say it’s interesting a.) because of what it makes available to customers, b.) because of what it means for competitors, and c.) because of what it means for Google.

Q: Let’s tease those apart piece by piece: what do you think this means for customers?
A: In truth, you’d need to spend a bit of time parsing on a per-market basis, because Google’s marketing this to a wide swath of the market – with information tailored at SMBs, Enterprises, School, and even families. The implications are different, obviously, because the competition is different. Where Google might be competing with ISP mail or hosted Exchange at the SMB level, as an example, they’re more likely to be battling on-premises Exchange, Groupwise or Notes within the Enterprise.

At a macro level, however, Google is making available the basics of office and collaboration software available for $50 per person, annually. What it gives up in features and functions – which is quite a bit when compared to messaging systems like Exchange or Notes and productivity software like Office – it intends to make up on a combination of price, availability, low barriers to entry, and a “good enough” offering.

The most important aspect of Google’s play here, as far as I’m concerned, is the availability, which is in turn derived from the Software-as-a-Service nature of the offering. Salesforce.com’s recent difficulties aside, SaaS is an increasingly important means of software delivery. Like open source, SaaS enjoys massive distribution advantages when competing with traditional shrink-wrapped, boxed software. This is more true with the messaging components than with the office productivity software, but . To install Google Apps, all you need is a browser. You don’t need servers, you don’t (necessarily) need IT guys, you don’t need boxes with CDs in them. For smaller businesses that view email and so on as a necessary evil, or those that are strapped for cash, this is a big selling point.

It’s also worth emphasizing the brand recognition element here. While Microsoft’s Exchange software is available in hosted fashion, as an example, customers have to choose from an often bewildering array of partners that they’ve likely never heard of, and may not trust. I should know; we’ve been through that, and have the scars to prove it. Google, on the other hand, is a known entity for the vast majority of the target market.

Q: I don’t necessarily disagree with any of the above, but I’m not quite sure what’s changed here. Weren’t all of these services already available, for free?
A: Yes, and Google is not likely to convince all of them to switch. I know a variety of small businesses running off of Google services, whether that’s an actual domain branded Apps offering or a far more basic [email protected] account. What’s different with this offering is that it’s now legitimatized for serious business usage.

Not to be too self-referential, but we declined to consider Apps as a messaging candidate for precisely the issues that Apps addresses. Here’s what I said at the time:

Via this method, Google was deselected. The reasoning was very simple: I did not feel comfortable trusting RedMonk’s email and MX records to a host that a.) I’m not paying and b.) doesn’t have commercial level support. So despite having very capable products, Google isn’t right for us at the current time; we’ll see if they get into the supported, for-pay applications business down the line, because they would have been a serious contender should those have been available.

To put it another way, the free applications are currently and undoubtedly will continue to be adequate for a certain, perhaps large, segment of the market. But they will now be considered in places they could not be before, because of the lack of SLA, phone support and so on.

Even customers of our size (4 people) want the ability to get support when things go amiss. Not to mention the promise that our mail isn’t just randomly deleted.

Q: Ok, what does this mean for Google’s competitors?
A: Depends on the competitor, of course. Is, as an example, IBM likely to be threatened by Google Apps in their installed base? Not to a significant degree, I’d suspect, although they’ll have an even harder time now winning downmarket deals (and growth will eventually demand those sorts of wins). Microsoft, on the other hand, is clearly in the cross-hairs here because much of their success from a messaging standpoint has come as a result of being simpler and less complex than Notes – a strategy Google will now employ against them.

As Cote says, any downplaying of the competitive threat to Microsoft here is just so much rhetoric, as there’s clearly overlap, and Microsoft will inevitably lose customers to this offering. That said, claims that this is the end for Exchange and Office are obviously premature; those offerings are protected by, if nothing else, customer inertia and buying behaviors that stretch back decades. Relying on that alone, however, would be a mistake on Microsoft’s part, as those are not sustainable competitive advantages. Microsoft will, at some point, need to respond to the threats that Google Apps pose to its various businesses. Disruption, thy name is Google.

Smaller vendors that are likely to be affected by this announcement in some part include Joyent, Scalix, Zimbra, and Zoho. Each of these vendors can and will differentiate themselves on the basis of technology – visibility, however, is likely to be a problem. Google casts a long shadow.

Q: And last, what does this mean for Google?
A: This is, to me, the most interesting part of the original question. Not from a technology perspective, because there’s nothing new here. And not from a market share perspective, as Google already had free entrants in these spaces so traction wasn’t a serious problem. No, the fascinating aspect to this announcement from where I sit is the economic model.

Google’s been phenomenally, absurdly successful in financial terms on the basis of a single (and oft-maligned) economic model: ads. While many in the industry are waiting for that bubble to burst, Google is happily turning in better and better results. Eventually, however, some revenue diversification is likely to be necessary if only as a hedge against potential external market conditions.

As a result, I’ve long believed that Google not only could but should introduce for pay versions of its products. This serves dual purposes, in that it gives a certain class of customer the peace of mind they need to employ Google Apps in fairly mission critical settings while providing Google with an additional revenue stream. Some would discount the latter factor in light of the fact that it’s likely to be incidental when compared to the monies currently flowing in from ads, but I think there’s an important psychological element potentially at work that should not be discounted. If Google Apps begins making money – even average dollars – it’s likely to be viewed differently, and accorded a newfound importance. Not when compared to the primary breadwinner – the search algorithms – but against, say, Google News, or Blogger. Might the latter, as an example, receive more attention if they were charging at least a portion of users? I’m curious to see whether Google Apps can pioneer a hitherto untapped revenue source for the firm, which I’m told is not a bad thing for commercial entities.

Whether it will be enough to convince Google that charging for certain services is not a bad thing remains to be seen. But just the fact that it could be makes it interesting.

Q: What do you view as the challenges for Google?
A: The biggest is likely to be the support element. Google’s been knocked many times before – and rightfully so – for having less than stellar responses to support. Many of the folks that I know that have had problems with a variety of Google services have been forced to revert to a non-scalable support avenue – contacting friends they know that work within Google. If they’re true to form, I’m sure Google will be doing everything in their power to throttle the types of calls they need to take, but they’ve got a lot more work to do there. Just a few weeks ago, I had to spend a half hour explaining the intricasies of MX records to someone who was considering Google Apps – that’s likely to be a problem.

More specifically, their capacity and ability to provide quality phone support is unproven, at best. So that will be something to watch; have they built the necessary infrastructure – both technical and people – to service the volume of customers they might anticipate? Remains to be seen.

It will also be interesting to watch how and where Google partners here. As Cote notes, there are apparently efforts underway from folks like Avaya and Sxip, and I’d expect more here. Collaboration, thankfully, is no longer just email and calendaring – but VOIP and presence and online collaboration and…well, you get the idea. Google provides much of this infrastructure, but has not, for example, yet extended into the PBX that are common to many SMBs. Are there opportunities, then, for the Digiums and Fonality’s of the world to wrap Google Apps with sophisticated call routing and handling environments? I think so.

Q: What aren’t people talking about enough with respect to the offering?
A: The file format question. The Docs and Spreadsheets portion of the Apps equation has the ability to both consume and export ODF documents (and, as far as I can tell, does not yet support Microsoft’s OOXML alternative), and coupled with the toolbar can disintermediate rich client tooling entirely. I wouldn’t go so far as to contend that this is a killer app for ODF, because awareness of the format hasn’t reached the levels it would need to in order to make that feature compelling (not to mention that many users will continue to prefer their traditional rich clients of choice), but this is likely to be the single biggest volume platform supporting the Office format alternative. Think of it this way: if ODF were to gain enough traction in marketplaces apart from the public sector, Google could flip a switch and make ODF the default export format for this offering. While that would not be a disaster from Microsoft’s perspective, it’s also not, in all likelihood, high on the list of things Microsoft would like to see happen.

The other interesting piece will be community support and extensions. To date, Google’s got a decent community brewing around third party support and addons – particularly in connection with the Calendar offering. Can they sustain and grow community as a competitive advantage (though not necessarily against Office, which has years of third party addons to choose from)? Remember: biggest community wins.

Q: What about from a RedMonk perspective, will this offering allow you guys to discuss switching?
A: Those conversations are actually already underway, having originally been triggered by the rumors of this announcement a few weeks back. Thus far, we haven’t made any decisions with some division within the firm around the offering. I personally haven’t made up my own mind as to preferences, as there are things I’m very interested in from Google (SMS calendar access, most notably), but things I’m concerned with (no IMAP or delete in email). As is always the case, we’ll detail our decisions in this regard once we’ve made some final decisions in The RedMonk IT Report.

Categories: Software-as-a-Service.

  • stephen hood

    “a killer app for ODF,”

    It doesn’t need to necessarily have high visibility :)

    Rich clients like the coming Notes 8 will help to bridge the gap…and more will now add ODF support to play with Google. OOXML has the albatross of .doc files around it’s neck.

    OS’s and Office apps are quickly becoming commodities – collaboration and integration is where the value lies. Google and IBM have a much better story to tell.

  • Alex Sharen

    Google apps alone is just too awkward a solution for a real business – Google apps in concert with OpenOffice… now that’d be a killer combo. You’d think with Sun and Google supposedly working together they could make that work.

  • sogrady

    Stephen: not sure if i agree. the latest Office iteration is likely to dominate the office productivity landscape yet again, and will immediately begin pumping out thousands of new OOXML files.

    as i’ve written before, i think Office suites are at the peak of their popularity, but that’s enough to seed a lot of OOXML.

    Alex: i agree and disagree. for traditional office workers, you’re probably correct. but for non-traditional workers, startups and the like, i’m not sure a suite is necessary. i use OO.o more and more rarely – and typically only when i interact with bigcos. as bigcos increasingly adopt the XML based formats over the traditional binary office formats, the web based tools ability to handle them appropriately will increase dramatically.

    should be fun to watch.

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