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3/21/2011
11:47 AM
Chris Murphy
Chris Murphy
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Global CIO: Even For Google, No Free Pass For SaaS

Google has made a notable concession to business users of Google Apps. It's a sign of things to come for software as a service, as enterprise customers get more demanding.



In the past, when Google decided a new feature was ready for Google Apps, that feature would just show up for business and consumer customers alike. Google considers that a key advantage of software as a service -- customers get a steady stream of innovation rather than have to wait for jarring upgrades.

But a lot of CIOs hate that approach, since they have no time to prepare employees or test their systems. So, as Thomas Claburn writes, Google has created a slow lane, where business customers get at least a week’s notice before Google will turn on new features in Gmail, Contacts, Google Calendar, Google Docs, and Google Sites.

Two things are important to note here. One, it shows that Google is taking enterprise customers seriously. Adding a dual track is no small move for Google -- businesses have long asked for this approach, and Google has resisted. Having two of anything is anti-SaaS, since the vendor economies of scale all point to having one version of the software. (For more on the challenges, see Assembla's post on "Should SaaS companies offer a "stable" version?")

Google has sent mixed signals about how important enterprise customers are to the company. When Google recently highlighted its vital emerging business lines, enterprise apps barely got a mention, as Google execs crowed about mobile, YouTube, and display advertising. I suggested last year that one of the company founders needed to embrace the enterprise apps opportunity by stepping up to take charge of that business. But now that the one person in Google's triumvirate with enterprise chops, Eric Schmidt, has been kicked upstairs, Google's enterprise business seems even less likely to rise in prominence. Financially, it's easy to see why: advertising makes up more than 96% of Google revenue, and enterprise apps falls into the "other" category that makes up the rest. (The NY Times' David Carr today explores whether Google is becoming a media company.)

Given this tepid corporate backing, steps like the Google Apps slow track, and the company’s promise to build a separate cloud environment for government customers, are important.



The second reason the Google Apps slow lane is important is because it sends a signal to business customers that Google can be flexible with them. Software as a service has had its honeymoon, and it's now going to face a lot tougher scrutiny.

That's my conclusion after reading the recent InformationWeek digital issue cover story, which looks at the state of SaaS and includes an exclusive survey.

Two numbers jump out from that State of SaaS article. First, we asked survey respondents about seven possible reasons their organizations might not use SaaS. Every one of those reasons is cited by fewer respondents this year than last year, except one: concerns about features/functionality. That percentage rose only a little--4 percentage points, to 20% -- but it's notable that business technology pros say their organizations are less satisfied with SaaS features today than they were a year ago.

The other key data point is that the percentage of respondents who say their organizations are satisfied with SaaS fell to 74% -- still impressive, but that's a big step down from 85% a year ago.

Companies were once just glad to get decent features from SaaS, quickly, without having to beg their IT teams to implement the service. (Well, until it was time to integrate those apps with anything.) Now, the fact that software is available as SaaS is no big whoop -- people take it for granted. The pressure increasingly is on SaaS vendors to ramp up features, make integration easier, allow for more customization, and offer better assurances on performance (SLAs) and security. Businesses won't just accept being a tag-along to a consumer-driven product.

As Michael Biddick writes in that SaaS cover story:

"It won’t be easy. SaaS providers’ profit margins are razor thin, and as the customer base expands and enterprises start demanding customization, providers will have their work cut out for them. For vendors offering both licensed and subscription as-a-service products, it’s a balancing act to offer world-class enterprise software while catering to a clientele that’s fixated on speed of delivery."

As SaaS customers get more demanding, Google must decide how badly it wants to win big business customers. Google's main rival for SaaS e-mail and collaboration leaves no such room for doubt: Microsoft is in land-grab mode, racing to get business customers on its cloud-based Exchange service.

Google showed some commitment to business customers with its recent Apps move. Count on would-be enterprise customers to keep testing that commitment with ever-tougher demands.


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