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Will Google Enter the Business Applications Market?

Google’s next killer app will be an accounting system, speculates Read/WriteWeb. While I am doubtful, I enthusiastically agree, it could be the next killer app; in fact don’t stop there, why not add CRM, Procurement, Inventory, HR?

The though of Google moving into business process / transactional system is not entirely new: early this year Nick Carr speculated that Google should buy Intuit, soon to be followed by Phil Wainewright and others: Perhaps Google will buy Salesforce.com after all. My take was that it made sense for Google to enter this space, but it did not need to buy an overpriced heavyweight, rather acquire a small company with a good all-in-one product:

Yet unlikely as it sounds the deal would make perfect sense. Google clearly aspires to be a significant player in the enterprise space, and the SMB market is a good stepping stone, in fact more than that, a lucrative market in itself. Bits and pieces in Google’s growing arsenal: Apps for Your Domain, JotSpot, Docs and Sheets …recently there was some speculation that Google might jump into another acquisition (ThinkFree? Zoho?) to be able to offer a more tightly integrated Office. Well, why stop at “Office”, why not go for a complete business solution, offering both the business/transactional system as well as an online office, complemented by a wiki? Such an offering combined with Google’s robust infrastructure could very well be the killer package for the SMB space catapulting Google to the position of dominant small business system provider.

This is probably a good time to disclose that I am an Advisor to a Google competitor, Zoho, yet I am cheering for Google to enter this market. More than a year ago I wrote a highly speculative piece: From Office Suite to Business Suite:

How about transactional business systems? Zoho has a CRM solution – big deal, one might say, the market is saturated with CRM solutions. However, what Zoho has here goes way beyond the scope of traditional CRM: they support Sales Order Management, Procurement, Inventory Management, Invoicing – to this ex-ERP guy it appears Zoho has the makings of a CRM+ERP solution, under the disguise of the CRM label.

Think about it. All they need is the addition Accounting, and Zoho can come up with an unparalleled Small Business Suite, which includes the productivity suite (what we now consider the Office Suite) and all process-driven, transactional systems: something like NetSuite + Microsoft, targeted at SMB’s.

The difficulty for Zoho and other smaller players will be on the Marketing / Sales side. Many of us, SaaS-pundits believe the major shift SaaS brings about isn’t just in delivery/support, but in the way we can reach the “long tail of the market” cost-efficiently, via the Internet. The web-customer is informed, comes to you site, tries the products then buys – or leaves. There’s no room (or budget) for extended sales cycle, site visits, customer lunches, the typical dog-and-pony show. This pull-model seems to be working for smaller services, like Charlie Wood’s Spanning Sync:

So far the model looks to be working. We have yet to spend our first advertising dollar and yet we’re on track to have 10,000 paying subscribers by Thanksgiving.

It may also work for lightweight Enterprise Software:

It’s about customers wanting easy to use, practical, easy to install (or hosted) software that is far less expensive and that does not entail an arduous, painful purchasing process. It’s should be simple, straightforward and easy to buy.

The company, whose President I’ve just quoted, Atlassian, is the market leader in their space, listing the top Fortune 500 as their customers, yet they still have no sales force whatsoever.

However, when it comes to business process software, we’re just too damn conditioned to expect cajoling, hand-holding… the pull-model does not quite seem to work. Salesforce.com, the “granddaddy” of SaaS has a very traditional enterprise sales army, and even NetSuite, targeting the SMB market came to similar conclusions. Says CEO Zach Nelson:

NetSuite, which also offers free trials, takes, on average, 60 days to close a deal and might run three to five demonstrations of the program before customers are convinced.

European All-in-One SaaS provider 24SevenOffice, which caters for the VSB (Very Small Business) market also sees a hybrid model: automated web-sales for 1-5 employee businesses, but above that they often get involved in some pre-sales consulting, hand-holding. Of course I can quote the opposite: WinWeb’s service is bought, not sold, and so is Zoho CRM. But this model is far from universal.

What happens if Google enters this market? If anyone, they have the clout to create/expand market, change customer behavior. Critics of Google’s Enterprise plans cite their poor support level, and call on them to essentially change their DNA, or fail in the Enterprise market. Well, I say, Google, don’t try to change, take advantage of who you are, and cater for the right market. As consumers we all (?) use Google services – they are great, when they work, **** when they don’t. Service is non-existent – but we’re used to it. Google is a faceless algorithm, not people, and we know that – adjusted our expectations.

Whether it’s Search, Gmail, Docs, Spreadsheets, Wiki, Accounting, CRM, when it comes from Google, we’re conditioned to try-and-buy, without any babysitting. Small businesses don’t subscribe to Gartner, don’t hire Accenture for a feasibility study: their buying decision is very much a consumer-style process. Read a few reviews (ZDNet, not Gartner), test, decide and buy.

The way we’ll all consume software as a service some day.

Update: As an aside, the Read/WriteWeb article that inspired this post demonstrates the “enterprise software sexiness” issue, which was started by Robert Scoble and became a Firestorm, per Nick Carr. I really think it’s a very thoughtful post, which, quite unusually for Read/WriteWeb sat alone at the bottom of TechMeme, then dropped off quickly. Now, has this not been about Accounting (yeah, I know, boring) software by Google, but, say adding colors to Gmail labels, in the next half an hour all the usual suspects would have piled on, and this would have taken up the top half of TechMeme. smile_sarcastic

Comments

  1. Google needs more than just a good product in the business app market, it needs a customer base. It does not yet have credibility in the business market and my guess is it would cost them more to build that credibility than buying an established incumbent. That is why I think a Salesforce acquisition would make sense for them. Zoho may make sense as a technology add-on for Salesforce, though that integration would be interesting…

  2. I *almost* agree, re. lack of credibility on the business market, with the exception that the “low end” of the SMB market (which is huge) is rather similar, perhaps more similar to the consumer market than the “business” market. Which is why I think it’s a better entry point for Google than the “enterprise”.

  3. Sure, and I understand that Zoho is targeting the SMB segment, but I wonder if the Google brand just means something different for that market. Google even has a hard time getting into other consumer/retail verticals, such as shopping comparison, instant messaging, and even video with its own brand.

    My gut feeling is that it needs to acquire an incumbent with a heavy brand recognition (as it did with Blogger and YouTube) and make that brand stronger over time. Zoho is somewhere in between, it has strong technology and some brand recognition, but not big enough yet for what Google needs. If it gets there, it can become a fantastic asset for Google and provide an equally fantastic exit for Zoho’s shareholders. Not to mention, it would be a nice long term home for the technology.

  4. I think I agree with both Zoli’s! SMB is where Google has historically shown that it wants to be, and snapping up an incumbent is (IMHO) the best way to get there in the accounting space.

    Specficially, I have one incumbent in mind: FreshBooks.
    http://techfold.com/2007/12/13/watch-google-buy-freshbooks/

    “So, when Read/Write Web and Jay Eye Sea suggest that Google has the motivation, resources, and market opportunity to get into online accounting, I say they’re going to pull a Feedburner/YouTube and just buy the best-of-breed that’s out there already. In doing so, they’ll get a great product, and great team, and a revenue stream.”

  5. Oh, Freshbooks is great!

    Other than the primary functionality they offer, I called them out for unveiling the hidden business model in Saas: offering additonal services based on the use of aggregate data.

    Come think of it, that’s what Google is all about, too! :-)

  6. That said, the Goog should go way beyond the functionality set Freshbooks can offer…

  7. George Skatilas says:

    All this CRM talk, and of course with Netsuite (N) finally going through with the IPO, does anyone know when stock options will be avail for public trade so the fun can really begin?

  8. i have been using less and less microsoft reaitl products but increasingly relying on their high quality dev, framework and server stack software. interesting post, I hadn’t noticed that i had diverged into saas for reaitl and microsoft for the SaaS utility. got me thinking about another idea. thanks ben

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