Another View | Why Google won't focus on business software

 

Connecting state and local government leaders

Commentary: When push comes to shove, Google's resources are going to flow into figuring out how to monetize the humongous traffic of YouTube or compete in online auctions.

The biggest competitor my company, AdventNet, faces as an online applications vendor is Google. Even as we compete with Google, we are also part of its ecosystem in a variety of initiatives, such as single sign-on for Google users, using Google Gears open-source technology for providing off-line access and so on. The situation is common in the industry: Companies like Google and Microsoft are both partners and competitors to a variety of other companies.We are often asked why we compete with Google. It is better to ask why Google is interested in the business software market. Let me explain with a spreadsheet.Focus on the revenue per employee and profit per employee. I have put the business software industry and the consumer Internet industry in separate groups. Notice how successful companies with mature business models, such as Oracle and Intuit, don't even pull down half the revenue per employee of Google, and perhaps surprisingly, they pale in comparison with the supposedly struggling Yahoo. EBay also towers over every software company except Microsoft. Finally, even Microsoft falls short of Google's revenue/profit per employee ' and Google isn't even milking a mature monopoly.Salesforce.com's numbers are instructive. Although it likes to pass itself off as an Internet giant, the company's revenue per employee is only in the range of its business software peers and is a fraction of the Internet giants. 'I know an internet giant when I see one, and you ain't no internet giant, Salesforce!'That revenue, I must add, is despite the company's out-of-this-world pricing for customer relationship management subscriptions. They pull in almost $1 billion in revenue on the backs ' some really overloaded backs ' of a little more than 1 million users, leading to almost $1,000 per user per year.Now it is clear why we compete with Google. Google is perhaps the most stunning technology success story ever, but we simply don't believe it has the rational business incentive to get too deep into the business/IT software category. The lower revenue and profit-per-employee figures would be tolerable if there were huge growth opportunities there. But when successful companies like Adobe and Intuit pull in revenues well shy of Yahoo, when even the enterprise software leader SAP is smaller and slower growing than Google and when Google makes nearly as much in profit per employee as SAP or Oracle make in revenue per employee, it is fairly clear this market is not going to make a material contribution to Google's growth and profitability objectives.So what is Google's plan? It is fairly obvious the company is in it to put Microsoft on the defensive on its home turf, to diminish that company's offensive capability in the Internet. It is also perfectly clear why Microsoft wants to be an Internet player: as Google has shown, it is a higher-margin business even than its monopoly-profit core business.So why is business software so much less profitable than the Internet? I can think of two reasons: 1) purchasing departments that know a thing or two about supplier margins and specialize in putting the squeeze on them and 2) sales and support costs, particularly support costs. When you sell software to businesses, they have all kinds of support expectations, which add to headcount. A search engine or a news portal isn't expected to provide any customer support.Also, within the business software industry, companies that sell to small and midsize businesses, such as Adobe and Intuit (Microsoft is also very strong in this area), have higher revenue per employee than companies that focus on large enterprises, such as Oracle or SAP. That is likely because strategies focused on those businesses lead to outsourced selling.When push comes to shove ' and there is a lot of messy push and shove in the business software market ' Google's resources are going to flow into figuring out how to monetize the humongous traffic of YouTube or compete in online auctions rather than figure out a way to squeeze a bit more margin compared to Oracle, Adobe or Salesforce. That might explain why Google has been silent on CRM, project management, invoicing or human resources tools ' because those markets don't offer the profit potential the company already enjoys.

Sridhar Vembu

Contributed






















Sridhar Vembu (zoho@techmarket.com) is CEO of AdventNet/Zoho

NEXT STORY: Delay-tolerant networking tested

X
This website uses cookies to enhance user experience and to analyze performance and traffic on our website. We also share information about your use of our site with our social media, advertising and analytics partners. Learn More / Do Not Sell My Personal Information
Accept Cookies
X
Cookie Preferences Cookie List

Do Not Sell My Personal Information

When you visit our website, we store cookies on your browser to collect information. The information collected might relate to you, your preferences or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. However, you can choose not to allow certain types of cookies, which may impact your experience of the site and the services we are able to offer. Click on the different category headings to find out more and change our default settings according to your preference. You cannot opt-out of our First Party Strictly Necessary Cookies as they are deployed in order to ensure the proper functioning of our website (such as prompting the cookie banner and remembering your settings, to log into your account, to redirect you when you log out, etc.). For more information about the First and Third Party Cookies used please follow this link.

Allow All Cookies

Manage Consent Preferences

Strictly Necessary Cookies - Always Active

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data, Targeting & Social Media Cookies

Under the California Consumer Privacy Act, you have the right to opt-out of the sale of your personal information to third parties. These cookies collect information for analytics and to personalize your experience with targeted ads. You may exercise your right to opt out of the sale of personal information by using this toggle switch. If you opt out we will not be able to offer you personalised ads and will not hand over your personal information to any third parties. Additionally, you may contact our legal department for further clarification about your rights as a California consumer by using this Exercise My Rights link

If you have enabled privacy controls on your browser (such as a plugin), we have to take that as a valid request to opt-out. Therefore we would not be able to track your activity through the web. This may affect our ability to personalize ads according to your preferences.

Targeting cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.

Social media cookies are set by a range of social media services that we have added to the site to enable you to share our content with your friends and networks. They are capable of tracking your browser across other sites and building up a profile of your interests. This may impact the content and messages you see on other websites you visit. If you do not allow these cookies you may not be able to use or see these sharing tools.

If you want to opt out of all of our lead reports and lists, please submit a privacy request at our Do Not Sell page.

Save Settings
Cookie Preferences Cookie List

Cookie List

A cookie is a small piece of data (text file) that a website – when visited by a user – asks your browser to store on your device in order to remember information about you, such as your language preference or login information. Those cookies are set by us and called first-party cookies. We also use third-party cookies – which are cookies from a domain different than the domain of the website you are visiting – for our advertising and marketing efforts. More specifically, we use cookies and other tracking technologies for the following purposes:

Strictly Necessary Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Functional Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Performance Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Social Media Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Targeting Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.