by Shane O'Neill

3 Million Businesses Go Google, But Microsoft Battle’s Still About Search

Sep 22, 2010
Data Center

The more money Microsoft has to throw at Office, the less it has for Bing. Google is no dummy when it comes to its cash cow.

Yesterday Google published a blog post announcing it now has 3 million Google Apps business customers, and 30 million users total accessing Google’s messaging and collaboration tools.

And as a sign of enterprise commitment, the company posted the blog from Google Atmosphere, an annual cloud computing event in Paris which this year hosted more than 300 CIOs and IT professionals.

In addition to revealing customer stats in the blog post, Google Enterprise President Dave Girouard fired off two new cloud capabilities within Google Apps. First, Google promises stronger security protection, via two-step verification, for Google Apps Premier — Education and Government Editions. Girouard also revealed new mobile editing capabilities in Google Docs on Android devices and the iPad.

Security and mobile enhancements are a given if you want to expand beyond consumers and small businesses (something Google is struggling to do.) But what should keep Microsoft on its toes is the steady increase in Google Apps business customers.

Google Apps usage, despite some growing pains with businesses and government agencies, has still been growing consistently since its conception in 2007. Earlier this year Google announced two million business customers; now it has three million businesses, and has been gaining approximately 1 million Google Apps users per month for the past year and half.

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Yet how many of these 30 million Google Apps users are even paying and how much revenue is Google Apps generating? We don’t know for sure, because Google doesn’t disclose revenue by product.

But estimated annual revenue for Google Apps is around $50 million, a minuscule portion of the company’s $25 billion war chest.

Moreover, Google Apps corporate adoption rate trails not only Microsoft Office (by miles) but also OpenOffice and IBM’s Lotus Symphony. In a March survey of 115 North American and European enterprise and SMB technology decision-makers, research firm Forrester cites that 81 percent are currently supporting Office 2007 — while only 4 percent are using Google Apps.

Google’s Apps strategy isn’t about making money — at least not directly. Without being a real threat to Office in the enterprise space, Google Apps has become a thorn in Microsoft’s side, forcing Redmond to change its business model.

Would Microsoft have created ad-supported Office Web Apps as part of Office 2010 if Google Docs hadn’t gained attention and users? It’s unlikely. Would Microsoft have put Exchange and Office Communicator in the cloud as part of its BPOS suite and then cut BPOS prices without pressure from Google? Probably not. And I know for a fact that enterprises are using Google Apps as a negotiation tactic when it’s time to renew Microsoft licenses.

Google is doing what it can to curb the Microsoft Office money flow. That’s really what Google Apps is about. There’s no doubt that Google is committed to developing the best Web-based productivity tools, but in a sense Google Apps is also a decoy used by Google to hobble one of Microsoft’s cash cows in order to protect its own cash cow: search.

It’s worth noting that Microsoft’s business division generated slightly less revenue in 2010 ($18.64 billion) than it did in 2009 ($18.91 billion). Still, that is a lot of money and the 1 percent decrease likely had little to do with Google Apps.

But the less money Microsoft makes from Office the less it will have to fund search baby Bing, which together with pending search partner Yahoo, now has a market share

of 28.5 percent, according to market tracker comScore.

If you were Google, wouldn’t you do all you can to protect the thing that generates almost all your profits?

So yes, having three million Google Apps business customers is a significant milestone. But until Google Apps’ gains are Office’s loss, three million is just a number.

Shane O’Neill covers Microsoft, Windows, Operating Systems, Productivity Apps and Online Services for Follow Shane on Twitter @smoneill. Follow everything from on Twitter @CIOonline. Email Shane at