Why Google's L.A. Win is Significant for SaaS

The Los Angeles City Council voted 12 to 0 last week to outsource its e-mail system to Google. The largest city in the country will make the cloud a home for its enterprise e-mail with a $7.2-million contract that will move all 30,000 city employees to Google. This might be the most significant win to-date for SaaS, a win that could drive others to cloud computing.

L.A. mediated security risks by placing a clause in the contract that requires Google to compensate the city in the event that the Google system is breached and city data exposed or stolen. That is something that every major SaaS contract should include, if you ask me. Also, this is not the free Gmail everyone knows. This is an enterprise version of their cloud-delivered software that comes without the ads, and with technical support.While it could be too early to tell if L.A. will be successful using Google as their e-mail and office automation solution of choice, this is a huge test case for cloud computing, specifically SaaS. While salesforce.com has had some great success around deployment of their SaaS-based CRM solution, corporate and government office automation applications have still been the domain of Microsoft and still are by a very larger margin.

Just as Google has been eroding Microsoft's hold on the home PC user, providing a free and well received alternative to Microsoft Office, larger government and commercial organizations have been resistant. However, when considering the cost of supporting your own Exchange and e-mails servers, including hardware, software, and people, the cloud option is much less expensive. There is no need to push software updates to the clients, no servers to back-up, and no data center space to lease. Moreover, most employees of the City of L.A. will already know the Gmail interface, perhaps having their own private accounts already. Thus, acceptance and training required should not be an issue.

What's significant about this contract is that everyone was waiting for someone big to go first, and that someone was the City of L.A. Of course, there are other state and local governments, such as Washington D.C., who use Google as their e-mail system, but L.A. marks the largest thus far. With the potential success of L.A. with Google, which will be well publicized, other large organizations will surely follow. At that point Microsoft could have some trouble on their hands as existing Microsoft users migrate away from Office on the client.

At the same time, Google could blow it if there are too many outages or if there is an information leak, or other intrusions. Of course, you know how it goes in the cloud computing world now. If Google has an outages, that must mean all cloud computing solutions are naturally evil. Not sure if I get that logic, but we clearly saw it with the T-Mobile fiasco, and the cloud computing spin that comes out of each Gmail outage in the last year.

I'm glad the decision makers at the City of L.A. weren't distracted by the hype and rumors. Good for them. Who's next?The Los Angeles City Council voted 12 to 0 last week to outsource its e-mail system to Google. The city will make the cloud a home for its enterprise e-mail with a $7.2-million contract that will move all 30,000 city employees to Google. This might be the most significant win to date for SaaS, a win that could drive others to cloud computing.