Gartner made some interesting comments about the relative lack of penetration of Google Apps at their recent symposium (see the full ZDNet report). Essentially, Gartner doesn’t believe that Google Apps is making much of an impact, at least not in a commercial sense, because they reckon that Google has only managed to realize $136.6 million in revenue for the nine months ended September 30, 2011. Gartner calculated its figures by analyzing Google’s SEC 10K reports to interpret that Google Apps represents 0.5% of overall revenue.
In passing I note that Tom Austin was the Gartner analyst quoted in the report. I’ve known Tom for quite a while and remember his attempts to market “Windows Office” for Digital Equipment Corporation (DEC) in the 1992-93 timeframe. DEC had an email client called TeamLinks that ran on Windows 3.1 and connected to either the MailWorks or ALL-IN-1 mail servers. Alongside TeamLinks there were efforts to link up with Microsoft to support DEC’s Compound Document Architecture (CDA). Word for Windows was to have the ability to convert to and from CDA-format documents and so be able to exchange information with DEC products running on VMS workstations. Twenty years on I ask myself have we really made much progress, but that’s another day’s work.
Getting back to the report, Tom assessed the cloud email and collaboration market as follows:
- Small businesses are running to Google.
- Large companies with more than 50,000 are saying no way to Google.
- Microsoft’s advantage is an installed base and easy move to cloud email. “It’s Microsoft’s game to lose,” said Austin.
- The email seat race will take decades to play out and Google appears to be a long-term player.
I wonder what data this analysis is based upon. My observation is that the first bullet would certainly have been true prior to the release of Office 365. Since then the availability of low-cost K and E plans allied to absolute application compatibility is convincing a lot of small companies who run their own Exchange servers to plan to move to Office 365 unless they hit one of the two big roadblocks (a dependency on public folders or the need to retain Outlook 2003).
I agree that large companies are much more likely to move to Office 365 than use Google Apps. Again, consistency and compatibility across Outlook, Word, Excel, and PowerPoint is a really big factor. Now that companies such as Quest have released migration tools to help move large companies to Office 365 I expect to see that pace increase.
I also agree that Microsoft has a huge advantage in its installed base. It is relatively easy to migrate mailboxes to Office 365 and the investment that Microsoft made in Exchange 2010 to build the Mailbox Replication Service (MRS) that is capable of background mailbox synchronization has paid big benefits. Certainly no one would have been happy to move hundreds of gigabytes of mailbox data into the cloud with the previous tools.
It does take time for companies to move email systems, even to stay within the same email family. That’s why some companies are only just getting off Exchange 5.5. Over the next few years, I suspect that we’ll see a large ramp-up of migrations to Office 365, mostly from small to medium companies running Exchange 2003 or Exchange 2007. We’ll also see strong interest in and quite a few hybrid (cloud and on-premises) implementations as Microsoft improves their coexistence story with new tools such as the Hybrid Configuration Wizard that’s included in Exchange 2010 SP2. Finally, there will be a significant group of mostly large companies who will stay on dedicated on-premises servers for one reason or another. I don’t see that Microsoft will experience any great losses to Google except in highly cost-sensitive situations or where a senior IT executive makes a stand and dictates that a company should move their IT investment away from Microsoft.
Of course, all predictions age rapidly immediately they are made and are rather like dead fish in that they smell more the older they become. It certainly doesn’t stop anyone making their own predictions based on what they see in the market – you’ve probably got as good a chance as anyone else to come up with the right answer. Have at it!