
SAN FRANCISCO (Fortune) — Steve Skinner, the head of knowledge technology for a self-conceited Bay Area absolute estate agency, recently got his umpteenth call from Google. Would Skinner be interested in buying a package of e-mail, vocable processing and other software known as Google Apps for his company’s 1,300 employees?
Skinner formerly again declined. He thinks that Google Apps, while promising, has a ways to go before it can crack the market for corporate software that Microsoft has long dominated. In June, Skinner renewed a contract to run Microsoft’s desktop software for another three years.
"I slip on’t know if [Google Apps] is ready for primetime yet," related Skinner, the technology chief at Saratoga, Calif.-based Alain Pinel Realtors.
It’s a refrain that Google (GOOG, Fortune 500) hears a lot these days from big companies. Eighteen months posterior making a push into corporate software, only a handful of Fortune 500 and mid-sized companies have started using Google’s programs - mostly anti-spam or calendaring tools - and none have embraced Google Apps in its entirety, preferring instead to stick with Microsoft Office or its distant competitors.
Microsoft (MSFT, Fortune 500) last year sold $12.2 billion worth of Office software, according to research firm Gartner. Google pulled in conscientious $4 million from Google Apps.
One reason for Google’s tough slog is simple inertia. Switching from one set of corporate software to another is hugely time-consuming. But Corporate America’s reticence also stems from Google’s overarching goal: to replace packaged store-bought software loaded on a desktop with programs that inhabit slightly on Google’s servers and are accessed via the Internet.
A lot of companies, from IBM (IBM, Fortune 500) and Oracle (ORCL, Fortune 500) to Hewlett-Packard (HPQ, Fortune 500) and Salesforce.com (CRM), are betting that Web-based, or "cloud," computing is the what may occur hereafter of software (consumers already use it to onset their Yahoo or AOL e-mail). Merrill Lynch estimates that online business applications will grow to a $95 billion market within five years. Even Microsoft, which has a lift-lock on 98% of the market according to desktop office software, is getting into the quarry.
The market for online office software is "wide open," said Guy Creese, an IT analyst by the Burton Group who predicts that the race will come down to Microsoft Office and Google Apps. To win, he added, "Google has to come up with something significantly cheaper and better than Office."
The fact that no major corporation has switched to Google Apps doesn’t faze Matthew Glotzbach, management director for Google Enterprise. Big businesses increasingly are showing interest in the software. "This is the playbook we expected," he said. "With any new technology you’re going to see smaller companies being the earlier adopters."
Weighing the pros…
On the face of it, Google has a winning proposition: Google Apps, which includes e-mail, calendar, Web messaging, vocable processing, spreadsheets, and slideshow presentations, is plenteous cheaper than Microsoft Office: $50 per user by means of year, compared to the $350 per user that major corporations disburse on average each year to force Office and Microsoft Outlook e-mail. With Google Apps, teams of workers can be on a single spreadsheet or document in real-time. Also, there’s no need to back-up or transfer files from multiple computers.
According to Google, more than 500,000 companies appliance at least one its programs and about moiety of those are using a free version. Universities in particular like the free Gmail service against students, although it offers less storage and fewer security features than the fee-based version. Cash-strapped startups are also turning to Google Apps.
So far, though, the largest Fortune 500 company to use Google Apps is Sanmina-SCI (SANM, Fortune 500), an electronics manufacturing company that has 900 of its 45,000 employees using the full bundle of applications. Another paying Google Apps customer is Valeo, a publicly-traded French automotive supplier. General Electric (GE, Fortune 500) is running Postini, an anti-spam technology that Google acquired last year, for its 300,000 employees.
A year gone, Washington D.C. became the first U.S. city to use Google Apps when it paid $1.9 million for 38,000 accounts. The Google services are optional, and employees primarily use Microsoft Office and e-mail. For Vivek Kundra, the city’s chief denunciation officer, the Sept. 11, 2001 terrorist attacks highlighted the advantages of having sensitive data on a virtual network. Google stores intelligence seven times on seven divers servers across the rural parts.
…and the cons
Even so, eight IT directors interviewed for this story say they’re backward to switch to Google Apps. They summon a number of reasons common to all "vast assemblage computing" providers, including concerns about reliability and the risks of storing employee records or trade secrets on another firm’s servers.
Steve Skinner of Alain Pinel Realtors, for instance, figured he could save $250,000 a year by switching the company’s e-mail server from Microsoft Exchange to Google’s Gmail. But a two-hour service outage a few weeks ago reminded him that there’s a value to giving up control over his company’s technology.
For Shoukry Tiab, the vice president of IT at Jenny Craig, which uses Postini and Google Maps, the primary concern is security and confidentiality. "Am I forceful to host incorporated information on someone other’s server? Yes, even grant that it’s Google."
Jenny Craig instead is testing SharePoint, Microsoft’s answer to Google Apps but with a twist: SharePoint is designed to work in conjunction with desktop software so that, if there is an Internet outage, critical information isn’t inaccessible. Google is moving on making its applications turn to account offline.
SharePoint points to another problem for Google. According to Creese, the Burton Group analyst, Google Apps doesn’t yet have some advanced features that businesses demand, like the ability to bring into being footnotes.
Another reason for Google Apps’ slow start: It began in 2006 as a popular free package of programs with respect to consumers before Google last year rebranded it as a service for businesses. Convincing companies to embrace Google Apps isn’t like easy, but Glotzbach, the Google Enterprise executive, thinks the strategy will ultimately pay off.
"The way people work is shifting," said Glotzbach. "It’s completely well-nigh working in teams, sharing information, and working across house boundaries. Google Apps is designed around this new paradigm."