Google’s 3% revenue coming from enterprise applications is massively important. The graphic running down the side of this post (courtesy of Pingdom) tells the main story. A few years ago, Google’s revenue from this ‘licenses’ line item was piffling. 3% doesn’t sound a lot but it represents $760 million. Going back to 2008, Henry Blodget provided some analysis where he said:
TechCrunch’s Michael Arrington cites a Google source who puts Google Apps revenue at 2%-3% of Google’s revenue, or about $400 million. This up 10X from $40 million last year…$400 million is peanuts relative to Office ($18 billion) and Google ($17 billion), but it’s still meaningful and impressive. The product didn’t even exist three years ago.
Henry got it a bit wrong because the year of that large jump, Google acquired Postini, an email security business. The smart money says that at the time of acquisition, Postini was posting something around $80-100 million. Regardless of how you look at it, Postini clearly had a massive impact on Google’s results. Fast forward and now we’re continuing to see Google generate 3% from applications generally (including Postini) but it has ballooned to a massive $760 million.
This is significant. It represents 90% growth in 2 years.
The last year or so, I’ve been keeping an eye out on Google Apps, watching to see how the company performs on wins in the enterprise. It’s been doing very well albeit most of the deal seem focused on email. Regardless of whether you think email is a dying business, Google’s foray into the business productivity area is proving that it remains a vitally important part of what we all do. From Redmondmag.com:
One year after launching its channel partner program aimed at offering Google Apps to enterprise customers, Google this week said it is approaching 1,000 authorized resellers. Moreover, a growing number of those who offer managed services are recommending Google Apps, according to a survey released earlier this month.
The MSPmentor 100 report for 2010 found that while 68 percent of MSPs now try to sell hosted Software as a Service (SaaS) offerings to enterprise customers, 22 percent promote Google Apps as an option.
The news is noteworthy in that there is much debate about whether Google Apps is a strong threat to Microsoft’s Office franchise and Business Productivity Online Suite (BPOS).
When Computer Sciences Corp. recently won the widely publicized $7.2 million contract to run the city of Los Angeles’ hosted e-mail network with Google Apps, many dismissed its significance. But some held it up as an example that Google and others such as Oracle, IBM and VMware may be a credible threat to BPOS and Office and an alternative for partners frustrated with Microsoft’s BPOS pricing and licensing terms.
“Millions of businesses have gone Google — and our resellers, too, have gained momentum,” said Stephen Cho, director of the Google Apps channel program, in a blog post Monday.
Earlier in the week, I was mildly debating this with another colleague. 1,00 sounds a lot but it isn’t when spread around the countries in which Google resellers are represented. That tells me there is huge upside for Google. If it is getting this level of traction from a relatively small number of resellers, imagine what will happen as more come on board?
Resellers generally are having a terrible time. Cloud based applications and services are the only ray of light for them at the moment. As we see more applications move to SaaS/cloud, Google will be a natural beneficiary. I predict that despite the interest in social computing, Google’s ownership of this slice of the market will become massively significant. When Toby Wright of TMG was talking yesterday, I heard him speak of the strategic importance of cloud applications with Google an integral part of that direction. The cost advantage alone of running GMail compared to running Microsoft Exchange is massive. Check the graphic to see what I mean.
If you have yet to look at GAPE then give it a shot. As always, the usual caveats regarding Google apply.
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- Google Apps expands Postini security beyond Gmail (computerworlduk.com)
- Google Apps highlights – 2/5/2010 (googleblog.blogspot.com)
- Google to apply Postini policy technology across Google Apps (infoworld.com)
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