Can Google Apps Crack the Fortune 500 and Large Enterprises?

Yesterday’s announcement that Salesforce.com would provide Google Apps for free to its customers sparked off a debate among analysts about whether Google’s web-based software can make inroads with large businesses, and specifically the Fortune 500.

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Until now, Google primarily has worked with small and medium businesses looking to capitalize on Google Apps’ low cost (the enterprise edition rings in at $50 per user per year) and its ability to enable people to collaborate in real-time on documents. Gaining large enterprise adoption, however, hasn’t necessarily materialized.

Microsoft still dominates the productivity space. According to Techcrunch, Microsoft made $16 billion from Office in 2007. Google Apps, conversely, made about $400 million, only accounting for a small fraction of Google’s overall revenue.

On the customer page of the Google Apps website, the chief technology officer of General Electric (GE) is quoted as saying the company is considering using the web-based software, and Procter & Gamble Business Services has enrolled as charter member. But analysts such as the Burton Group’s Guy Creese says Google Apps hasn’t caught on yet in the Fortune 500 .

“Because Google Apps came out of the consumer space, there’s a bunch of things missing [for enterprises],” says Creese, who also wrote a report pondering if adopting Google Apps could be “career limiting” move for IT leaders in the enterprise space.

Among the primary features Google Apps fails to have in its portfolio, Creese notes, are sufficient offline functionality and records management for documents. While Google addressed the offline problem for its documents and spreadsheets last week, a similar function has not followed for its enterprise Gmail.

During a question and answer session after the companies unveiled their newest partnership at the Four Seasons hotel in San Francisco yesterday, Dave Girouard, vice president and general manager of Google Enterprise, and Salesforce.com CEO Marc Benioff noted that the issue becomes less relevant as the ubiquity of wireless and other connections to the Internet continue to envelop the world.

But even if companies can get over the offline issue, the adoption of Google Apps could be a cultural challenge as much as technological one. Microsoft’s technology has pervaded the enterprise space for so long that many IT managers, as well as regular users of the Office software, have difficulty seeing how they could get off of it.

“Office is woven into line of business applications [in the enterprise],” says Tom Austin, a Gartner audience.

Austin noted another problem IT departments at large enterprises at a session on cloud computing last week at the Gartner conference in Las Vegas: it doesn’t offer a road map for IT departments. That’s something enterprises crave.

“Does anyone get a road map from Google?” Austin asked the audience. “No. For every application Google offers, there’s a blog with it. Go read the blog, they say, and you’ll see what new features we offer. You’d never accept this from a mainline vendor.”

Salesforce.com, on the other hand, has become a trusted, mainline vendor, says Rebecca Wettemann, a vice president and analyst with Nucleus Research. She notes that Salesforce.com has become successful at selling enterprise software “in the cloud.”

Google even somewhat conceded that it considered this street creditability in the partnership.

“Salesforce.com has a lot of credibility in the market, and they’ve proven themselves over many years,” Scott McMullan, lead partner at Google Enterprise, told CIO last week. “We’ve been out there more recently, and we’re still getting out our story.”