(this is a cross posting with MiramarMike.co.nz)

Sridhar Vembu, CEO of Zoho, has posted a fascinating insight into the perceived strategy of Google that includes some astounding financial facts such as:

Google makes nearly as much in profit per employee as SAP or Oracle Salesforce make in revenue per employee

He concludes his thinking with:

It is fairly obvious they [Google] are in it to put Microsoft on the defensive on its home turf, so that Microsoft’s offensive capability in the internet is diminished. It is also perfectly clear why Microsoft wants to be an internet player – as Google has shown, it is a higher margin business even than its monopoly-profit core business.

I suspect there are two other reasons
Firstly, Google is a business like any other and has the same computing needs as all companies (word processing, sharing information yada yada yada) and there was NO WAY they were going to let a (“the”) major competitor be the vendor for the IT solutions. And so they bought/built their own. Once they were stable enough why not use them as a weapon as outlined above.

The second reason is hinted at in Google Blogscoped’s, Why Google Buys Companies:

Data. Like articles, meta data, digital archives, photographs.

As we know, Google’s stated aim is “to organize the world’s information and make it universally accessible and useful.” This statement does not limit itself to “only websites” … it’s the “world’s information”. The vast majority of the “world’s information” is not packaged up all neatly onto a publically facing website – it’s held in Word documents, emails and PC C: drives. How was Google to get access to this information – by providing the tools for us to move our use into the Web and let Google get at it.

Oh, and as a response to Sridhar’s post the C|Net News writer Dan Farber has posted Zoho’s last stand which is, again, a great read with the takeaway point for me being:

If Google can attract consumers with its apps, gaining entry into small- and medium-size business won’t be a huge profit-sucking sinkhole of sales and marketing. The search giant claims that more than 500,000 businesses and schools have signed up for the free and $50 per-user-per-year Google Apps. According to Dave Girouard, head of Google’s enterprise division, the Google suite has about 10 million active users. Google can afford to invest in building the the market for Google Apps, and Microsoft will be forced to alter the economics of its Office business as cheap and capable cloud-based suites, with offline capabilities, gain traction.

Mike Riversdale

I (Mike Riversdale, aka Miramar Mike) have worked all my professional life alongside users of information with my work with software vendors (Business Objects, Sydney), New Zealand government agencies (Department of Corrections, Ministry of Health, Christchurch City Council), charitable organisations (skylight) and private/public companies (Fronde, Etam). My focus is always on the real users and their information demands - I have been called the "people's poet"! Working for Fronde and as an independent consultant my role is to introduce the concepts, educate around the challenges and ultimately help deliver available, findable and useful information to those that need it. I am experienced in the full gamut of Enterprise 2.0 tools and, despite a leaning towards open source, I am totally vendor independent - whatever works for the client!

  • Awesome post Mike – and awesome analyses from both Sridhar and Dan. I kind of get Sridhar’s point about office apps being lower margin and therefore not attractive to Google. I guess the question to be asked it what happens if/when the Google growth slows and they have no option but to push into lower margin products – if they’ve still got the sort of cash they have now, the damage could be pretty nasty to watch – to MS and to other players.

    Zoho is a fascinating story and I’m looking forward to meeting Sridhar in a couple of weeks

  • Can I ask you to ask one question on my behalf – “Why would a business use Zoho over a web based MS Office?”

    Thanks 🙂

  • @Mike – sure I will – although it’s a little hypothetical as there is no web based MS Office as yet

    Not to mention that MS Office doesn’t include CRM, Invoicing,wikis, planning, chat, PM, web conferencing, DBs and HRIS – all of which Zoho does

  • Sure there’s a Web based MS Office, just not out to the world yet.

    I don’t think people using MS Office care about CRM, invoicing, wikis, planning … but maybe I’m wrong.

    Ask and find out 😉

  • @Mike – yes I believe you are wrong. Zoho’s products are targetted at SMBs.

    SMBs do in fact need CRM, invoicing, Wikis


  • True … but people using MS Office is the audience I’m asking about – people, not SMBs. The word process-ors, spreadsheat-ors and mail-ers was who I was talking about not the whole organisation which may well want everything else.

    Most “knowledge workers” use MS Office most of the time … and that’s where MS will (initially) aim there “attack”/push.

  • @Mike

    Actually your question was “Why would a business use Zoho over a web based MS Office?” – to which my answer was aimed


Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.