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Google Cedes Enterprise to Microsoft

Google Vs. Office

Last week a number of fairly momentous events happened related to Google: 1) Their stock briefly dropped to $488.52 a share — a staggering 35% off its intra-day high of $747.24 set last November, 2) Microsoft announced a bid to takeover Yahoo in a move aimed straight at Google’s heart, and, 3) Google basically admitted defeat in its attempt to sell their online productivity application suite to enterprise customers.

The first two items have been covered to death by both the mainstream press and bloggers, but the third item sort of slipped by. The New York Times [reported] that Google has released a “Team” version of their Google Apps suite that allow individual’s to sign up for shared workspaces and access to online apps by providing their company email address. Once registered, they are automatically added to a group with all other people in their organization who have signed up and — presto! — they now have the benefit of using Google’s applications and collaboration tools for FREE, and without ever having to bother with those nasty nerds in their IT department. Nick Carr, who believes that IT departments are going the way of mastodons and saber-tooth tigers, [describes] Google’s apparent end-run around corporate channels to bring customers (well, they’re not really customers yet are they since they don’t pay…) into the “cloud” and grow their business virally. According to the conventional wisdom, this is wily Google doing what they do — upending traditional business sales models — by getting a cadre of users to pressure their companies to (eventually) shell out $50/seat to license the full enterprise suite. But Nick and others may be pulling too strenuously at the Kool-Aid spigot.

There’s another way to look at it — from someone who works in IT at a very large marketing firm: Google, lacking the ability to sell their products in to enterprise customers through traditional channels (their recent 8K filing indicates that fees from “Licensing and other revenues” — i.e., non-advertising related income — only amounts to $69MM and still makes up just 1% of their total revenue) have decided to risk poisoning those relationships for the foreseeable future by executing this “end run” to end users. The only companies that would not have a very big problem with what they have done are small shops, without large IT departments of their own and without a roster of clients who expect or demand strict control over the management of their proprietary materials.

As soon as I heard about this I checked out the Terms of Use for Google Apps Team Edition and sent an email to the worldwide CIO of my company alerting him to these two conditions set forth by Google:

Regarding Google use of posted materials:

“Google reserves the right to syndicate Content submitted, posted or displayed by you on or through Google services and use that Content in connection with any service offered by Google.”

Regarding liability for loss of posted materials:

“You agree that Google has no responsibility or liability for the deletion or failure to store any Content and other communications maintained or transmitted by Google services.”

Elsewhere in the Terms, they state that users maintain full ownership of materials posted to their servers (of course the people posting may not, in fact, be the owners of the material they are posting…), but then they say that they have the right to make use of the material in their properties… And what if Google should accidentally destroy an important document that is posted to their servers? They claim no liability because someone who may not even own the material in question has agreed to their Terms. If I was an IT director, I would never trust Google after this. Given the potential legal nightmares this could lead to it’s hard to know if this attempt to solicit business customers is merely another example of Google’s arrogance, or ineptitude or desperation. Perhaps all three.

But large enterprises can protect themselves from any liability this might lead to by simply blocking access to the Google Apps domain at the company firewall and issuing a memo telling employees they risk termination if they use the service without oversight. Google must surely know this, which makes me think they are willing to burn any potential bridges to corporate enterprise IT departments because they know there is no upside there for them. They cede that territory to Microsoft’s sales force and are targeting the SMB world, where things are… looser.

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