Why Google Can't Penetrate the Enterprise


A recent post on CNNMoney by Yi-Wyn Yen, "Google's tough sell to Corporate America," took me back to the work I did for IBM in the early '90s when we were trying to spin out IBM software and analyzing Microsoft's unbelievable (to IBM) competitive advantage. It also got me to recall the day I presented to Boeing on IBM's, Microsoft's, and Netscape's e-mail products and got told clearly that Netscape would never be invited back. In the first instance, Microsoft moved into the enterprise gradually and with help. In the second, Netscape thought it could burst in with a smile and a promise and discovered that smiles and promises only get you through the door once -- they don't lead to sales.


It amazes me how many companies look at enterprise sales and see what they think are large dollars for very little work. They they discover that this market requires massive work and while the revenue is good, the profit really isn't that great. Let's talk about why Google is bouncing and why it is its own fault.


Google's Longest Yard


Without IBM's help, Microsoft probably would have either never made it formally into the enterprise or been held back at least another five to 10 years from penetrating this difficult market as well as it did. IBM's initial backing gave Microsoft the boost it needed and a large number of IBM and Digital employees were recruited so that IT managers saw familiar faces when they met with Microsoft reps and executives. This actually became a bit of a problem inside Microsoft, which adopted many of these bigger companies' bad habits, but we'll save that for another time.


Enterprise sales are all about relationship and trust because IT managers know that what gets them into trouble (fired, demoted, or outsourced) are unexpected problems that adversely affect the line of business. Saving money is important but it can lead to expectations that come back to haunt these folks in the following year. For instance, if you take in a lower-cost provider and save 20 percent one year, your following year objective for cost reduction is likely going to be 25 percent. For some reason, folks can't seem to get that cost cutting doesn't work the same as revenue building. So while lots of companies make a big deal about cost cutting, the goal really is more cost containment, coupled with the desire to not take on any additional risk.


Moving into the Enterprise


Microsoft was fortunate on two fronts. We often forget the second. The first was IBM's blessing, driving DOS and then Windows into the market. The second was IBM reaching a stage that, unfortunately most dominant companies reach, where it became almost impossible to increase revenue significantly without raising prices. Plus forgetting that, to be successful, you have to raise the perceived value of the offerings at the same time. In addition, IBM had really stopped listening to customers. Internally, systems that were to assure customer satisfaction were being gamed, hiding just how upset these customers were becoming. It wasn't that Microsoft was just cheaper; it was that IBM had stopped being a solution and started being a problem that Microsoft fixed. Microsoft, with a fraction of the resources that IBM had, cut through the market like a hot knife through butter but bounced on high-end servers, which required a level of services it was unwilling to provide.


Linux moved against Microsoft in a similar fashion. Thanks largely to an adjustment designed to simplify pricing, a number of enterprises, generally because they were underpaying based on their contract, got audited and suddenly were faced with large, unplanned cost increases. This came on top of an increasing belief that Microsoft wasn't listening, nor was it being transparent or interoperable enough. Linux, with a fraction of the resources that Microsoft had, cut through the server market like a hot knife through butter, but it bounced on the desktop, which required a level of consistency it was unwilling to provide.


Netscape ran against Microsoft at its peak, tried to move on price, had no history of reliability, and was way too full of its own fame. The reason Boeing wouldn't let Netscape come back is that the presenter spoke about his own personal wealth on stage, alienating the audience. The one big deployment it got, to my knowledge, never actually worked well and, during the time I observed it, was down more than it was up -- and this was an e-mail system.


Google's Longest Yard


Microsoft does have an IBM-like problem. That problem exists on the desktop, and neither Apple nor Linux are willing to do what it would take to make major inroads. And Google isn't in a good position because what it has brought to market has gained a reputation for being unreliable. While it is also cheaper, no IT manager is going to trade off reliability in an offering that touches any large number of line employees and executives. Google may have already damaged its own image with the very visible problems surrounding Google Apps and Gmail so that it is out of the running for the enterprise.


Small business, on the other hand, is likely more forgiving, and that apparently is where Google has made some inroads. In addition, it could buy into this market as it did by acquiring Postini, but its reputation, if it isn't improved, will hurt the growth of the acquisition more than it helps Google. Google's mistake was going after the enterprise without a large validating partner and with a product that wasn't enterprise ready. The end result is that it's made an impression that may be incredibly difficult to overcome.


No matter how upset an IT manager is at Microsoft, they are unlikely to change a known and manageable problem for one that is also known, but unmanageable, no matter what the savings. Enterprises are Google's longest yard and the company has only itself to blame for making it so.


The Enterprise Lesson


Enterprises are simple: You need credibility (size, resources, familiar faces), reliability, substantially better value (note I did not say lower price), and the vendor you want to displace has to be exposed. Most companies replace the "and" with an "or," and that is why they fail. Google is not an exception, and Microsoft does appear to be slowly fixing much of its exposure, suggesting that time isn't unlimited either.