Monday, January 08, 2007

Google & the Virtue of Banks vs. Mattresses

An interesting piece from the Economist about Google's better moustrap, and how consumers and businesses run to it - even if their IT pros tell them not to:

IN OCTOBER, shortly after taking over as head of information technology (IT) at Arizona State University, Adrian Sannier gave the nod to his contact at Google, the internet giant known for its search engine, and with one flick of the proverbial switch 65,000 students had new e-mail accounts. Unlike the university's old system, which stores e-mails on its own server computers, the new accounts reside on Gmail, Google's free web-based service. Mr Sannier is not forcing anybody to change but has found that the students, many of whom were already using Gmail for their private e-mail, have been voluntarily migrating to the new service at a rate of 300 an hour. Crucially, they can take their “” e-mail addresses with them.

The service, part of a bundle called “Google Apps for Your Domain” that also includes instant messaging (IM) and a web-based calendar, has not even been officially launched yet. It began running in a test (or “beta”) form in August. But Dave Girouard, the boss of Google's small but growing enterprise division, says that “tens of thousands” of organisations have already signed up to use Google's web-based tools in place of traditional in-house e-mail systems and other software.

Using Google's services has several advantages for companies. Most employees already know how to use web-based software, and thus do not need training. They can access the services through any web browser, regardless of what kind of computer (or telephone) they use. Like the consumer service, the corporate product is free. (Mr Sannier pays for support—“less than $10,000”—but most organisations do not.) And in-house IT staff need do absolutely nothing, since the data and software reside on Google's server computers.

For Mr Sannier, however, a bigger reason than money for switching from traditional software to web-based alternatives has to do with the pace and trajectory of technological change. Using the new Google service, for instance, students can share calendars, which they could not easily do before. Soon Google will integrate its online word processor and spreadsheet software into the service, so that students and teachers can share coursework. Eventually, Google may add blogs and wikis—it has bought firms with these technologies. Mr Sannier says it is “absolutely inconceivable” that he and his staff could roll out improvements at this speed in the traditional way—by buying software and installing it on the university's own computers...

With Google Apps for Your Domain and other software services that are accessed through a web browser, the security issues are more subtle. Since the software and the data reside on the service provider's machines, the danger is of losing control of sensitive data, which is now in somebody else's hands. Most IT bosses find this scary. Not so Mr Sannier. He remembers a picture that Google showed him of one of its data centres burning to the ground; it looked awful. The point, however, was that no users of Google services anywhere even noticed, because Google's systems are built to be so robust that even the loss of an entire data centre does not compromise anybody's data.

“I have a staff of about 30 people dedicated to security,” says Mr Sannier. “Google has an army; all of their business fails if they are unable to preserve security and privacy.” Google's Mr Girouard says a similar evolution in trust occurred when people reluctantly accepted that their money was safer in a bank than under a mattress.

This trend could cause problems for traditional software firms such as Microsoft, Oracle and SAP. Already, start-ups such as and NetSuite provide “software as a service”, supplying sales-force automation, accounting, payroll and other features via the web. (Marc Benioff, the founder of, had the idea for his firm while browsing on Amazon's online store one day. Why, he wondered, could business software not be delivered the same way?) Other firms, including Google, provide web-based e-mail, word processing, spreadsheets and databases...

All this means more choices at lower prices - and probably greater security - for millions of online consumers. And even if Google makes enough mistakes to yield this business space, there are certainly other companies that will learn the lessons and fill any void.

Hat Tip: MEF

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