Why Google Apps Hasn't Taken Off in Large Enterprises

Last week, Fortune magazine published an article ("Google's tough sell to Corporate America") and blog entry ("Gen Y takes to Google Apps") on Google Apps, noting that it was popular with Gen Y but not with large enterprises. To put it in perspective, Fortune noted that Microsoft made 3,000 times more revenue than Google off of its Office software: Microsoft sold $12.2 billion of Office software in 2007; Google sold $4 million of Google Apps. Large enterprise sales have been few and far between. Fortune notes:

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 package of applications. Another paying customer is Valeo, a publicly-traded French automotive supplier. And General Electric (GE, Fortune 500) is running Postini, an anti-spam technology that Google acquired last year, for its 300,000 employees.

I'd predicted this would be the case when I published my first report on Google Apps a year ago (Burton Group clients can access the April 2008 revision here). So why is that? Google Apps has done well within small- and medium-size businesses (SMBs); large universities such as Arizona State and Northwestern have also adopted it.

It comes down to four reasons. First, Gen Y is not yet in charge of IT strategy at large corporations. Google is banking on Gen Y employees demanding Google Apps--"'We’re not waiting 15 to 20 years. The generation of new [office apps] users is already here,' says Glotzbach"--but there's a difference between a minority of employees (without seniority) pushing for them and the older generation of CIOs mandating them. While small companies headed up by Gen Y workers are happily using Google Apps, large enterprises headed by 50- and 60-year olds who are used to Microsoft Office are taking a wait-and-see attitude.

Second, Google's consumer-centricity has done it a disservice here. Google basically took a consumer service, slapped an Enterprise name on it, and assumed companies would lap it up. Unfortunately, Google neglected to add features (so far) that competing packages have offered for more than a decade, such as tables of contents, footnotes, sophisticated e-mail distribution lists, and records management capabilities. (Although Fortune quoted me as saying that the lack of footnoting was a major deficit [I'm sure because it was an example everyone would understand without needing an explanation], the lack of records management capabilities for documents and the need for better distribution lists are the bigger problems.)

Third, the incremental benefits of using Google Apps are not that great. True, you can edit documents concurrently--which you can't do in Microsoft Office--but otherwise Google Apps is pretty much a straight copy of base Microsoft Office functionality. In other words, Google Apps makes do by copying the market leader in a rudimentary way, rather than taking the gloves off and pounding away at the things Office doesn't do: keeping track of who's reading what, suggesting other documents it might be useful to refer to, recognizing that a document similar to this one has already been written and suggesting that it might be easier just to modify the earlier document. Software as a Service (SaaS) office productivity suites can do so much more than software because they can watch the community working, and thereby help the community leverage what it already knows. Amazingly, Google doesn't take advantage of that architectural difference.

Fourth, large enterprises are behemoths--enterprises aren't inclined to change and there's nothing compelling in Google Apps at the moment to make them change (and the attractive low price isn't enough). Word processors replaced typewriters not because they did the same thing, but because storing digital documents made revisions so much easier--word processors offered a quantum leap in productivity. Google Apps doesn't offer that productivity leap yet.

When it does--or a Google competitor does--I think large enterprises will do well to adopt the new technology. Until then, more nimble SMBs and cash-crunched universities will be the sweet spot for Google Apps.

Comments

[Mike Riversdale]

I think you're right on point 1,2 and 4.

However I believe, and am now experiencing as the light goes on with major clients of mine, just how fundamentally different Google Docs is to, say, Microsoft Word - it is built on the Internet and therefore it is fundamentally connecting and sharing the "words" is therefore what it is all about (more at this post: http://work.miramarmike.co.nz/2008/04/google-docs-so-what-one-reason-why-you.html)

Once that light comes on points 1,2 and 4 are then experienced at a heightened level ...

[vitiris]

I think another point is that Enterprises are not comfortable with storing all there data on Google servers. This is especially true with Government IT. A lot of data is sensitive or proprietary and should not be accessed or stored across an Internet connection. And it is not viable to split your systems so only non-sensitive data is stored on Google servers.

[Fred]

With Microsoft :
- you have consultants to accuse.
- you own "physically" (=stored on the infrastructre) your data.
- you have many tools, exports function, etc. that use or generate Office documents (PPT, Word, Excel, etc.).
- you have the green light from the Gartner (A manager will never go against a Gartner recommandation).

BTW, can you imagine your Insurance seller, banker, etc. telling you that some/all the data he has regarding you are stored at google's?

Would you think it is cool?

Gen Y does not understand the risk of storing uncrypted data outside your company.

Does someone has some figures regarding the temps, consultants, etc. working at google who can access users' data?

[Geoffrey de Caires]

We switched our five hotels of to GApps in February because the cost of hosting Exchange and dealing with Spam and Viruses was prohibitive. By in large we solved those problems but the lack of public folers, true contact sharing and connectivity issues with Outlook is making us move to in-house hosted mail on postfix. I'm sad about this becuase the decision to move was mine and I thought that Google could do it for us. Like everyone else, I hate to be wrong.

[ArgiaSbolenfi]

In my opinion, the lack of contact sharing in Google Mail is enough for many companies to stay with Exchange or Notes.

I'd like to know why Google can't understand this. How can you have an enterprise mail system without an even simple shared addressbook. What's a point of having advanced features like video sharing without such a basic thing.

[erwin]

Google Apps won't fly, its Google mail lack of feature make it not good enough for online collaboration, still Microsoft got the best shot here coz this is software!

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