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Google Searches for SaaS Channel

Google needs the indirect channel to create new revenue opportunities for its Google Apps Premier Edition, but will the search giant be able to earn the trust of resellers?

February 26, 2009

13 Min Read
Google Searches for SaaS Channel

By Cara Sievers

One of the fundamentally recognized characteristics of the indirect channel is its ability to reach markets that its vendor or service provider partners cannot. For this reason, Google Inc. (GOOG) launched a reseller program for its productivity suite, Google Apps Premier Edition (GAPE), in mid-January. It seems the search giant hopes to populate the world with GAPE resellers, tapping the channel for its ability to turn even the smallest of the small businesses into a revenue opportunity. And although many smaller businesses have tried the service out with the Google Apps Standard Edition free product, which is capped at 50 users, many are already seeking the higher levels of storage and support that the Premiere Edition offers.

Of course, cloud-based computing makes sense for Google since it was born and grew up on the Internet. Currently, more than 1 million businesses and 10 million users subscribe to Google Apps, and now GAPE has arrived on the channel scene with what Director of Apps Channels Stephen Cho dubbed a “mature” set of software as a service (SaaS) solutions.

The GAPE suite of communication and collaboration tools includes Gmail, Google Calendar, Google Docs, Google Sites, Google Talk and Google Video for business. The Premier Edition, which debuted in February 2007, bundles these messaging and collaboration tools with some of Google’s Postini e-mail and security products, along with antivirus and antispam.

“We’ve extended the SLAs for all of the products in the suite, [and have attained] SAS 70 Type II compliance, so there is an increasing robustness of the enterprise-class nature of the product,” explained Cho. “Companies all around the world, from the smallest companies up to the largest companies, are truly finding value and are actively using the products across the board.” Cho said there are more than 3,000 users signing up on a daily basis — but Google is looking to the channel to increase that number by doing what it does best — add value.

Analyst Steve Hilton, vice president of research firm Yankee Group’s Enterprise Research Group, thinks the channel is just what Google Apps needs to succeed. “The weaknesses of Google Apps are the strength of the channel,” said Hilton “Google Apps don’t handle workflows and external application integrations well. The channel can devise solutions (including Google Apps) and provide the implementation services needed to fully empower an enterprise.”

Rolling Out the Program

Google has spent the past several quarters rolling out the Google Apps reseller program to more than 50 pilot resellers in more than 25 countries. The program is now open for applications from interested channel partners of all types, but Google is clearly encouraging inquiries from companies with a strong SaaS orientation and a business model built around providing value-added services and solutions. Potential resellers will be evaluated based on relevant experience and credit worthiness, and, once authorized, will be able to begin selling Google Apps by the end of March.

The program enables authorized resellers to sell, customize and support GAPE for customers of all sizes, allowing both channel partners and their customers to ease into the world of cloud computing. Resellers will bill their customers directly, enabling them to retain a close relationship with customers — the relationships being at the core of why Google launched a channel program for Google Apps in the first place.

“We have had a lot of feedback from [the pilot resellers] helping develop and refine the program and they have indicated that one of the key things for them is to maintain that client relationship, and providing them with the billing relationship is one of the key things we think is important and is also different than other programs in this space,” said Cho.

The margin-based channel program gives partners a 20 percent discount on the product in the United States and a similar discount in other regions. With GAPE list-priced at $50 per user, per year, partners pay $40 and mark the product up however they choose.

Ideally for Google, the resellers will bundle or build on value-adds to Google Apps in order to meet the specific business or technical needs of their business customers. And although the GAPE channel program is open to all types of partners, including IT consultants, systems integrators and traditional telecom agents, Cho feels the most successful partners will be those who can provide a value-add.

“Everyone is invited to apply,” said Cho. “[However], there are certain processes in the evaluation which will naturally bring certain folks into the program and less so others. In some cases, there is a step in the process where they are asked to demonstrate real expertise to get up and deploy and activate. So, a purely transactional-based agent who would not be out doing that delivery would have more challenges working through that process.” That said, there is no formal certification program for resellers as of yet.

Dr. Stefan Ried, a Forrester Research senior analyst covering SaaS and platforms with a focus on vendor strategy, believes Google’s enlistment of the channel stands to increase the pervasiveness of its Google Apps product. “Similar to the way Salesforce.com motivated other ISVs to complement its CRM application, Google has an opportunity to complement their generic Google Apps by industry-specific business logic contributed by ISVs and resellers,” explained Ried.

In addition to customizing the suite for the end user, resellers also can provide remote service administration, broadband access services, ongoing end-user support, and data migration and integration.

For example, Horizon Info Services, which has served as a pilot GAPE reseller since September, provides full service activation, e-mail migration services and end-user training and support. Additionally, the reseller integrates Google Apps features, like calendars and forms, into clients’ Web sites and intranets, and also helps customers create Google Sites as intranets or customer service portals.

“Google Apps Premier Edition competes well as a hosted e-mail and calendaring service against traditional POP and hosted exchange providers,” said Allen Falcon, CEO of Horizon Info Services. “With free BlackBerry integration and the collaboration tools, we can demonstrate greater value and savings for companies looking to better use the Web to communicate and collaborate internally and with customers.”

Another pilot reseller, Cloud Sherpas LLC, has developed a process for migrating medium and large businesses from legacy messaging systems, such as Microsoft Exchange, Lotus Notes and Groupwise. Then the reseller provides post-implementation support. Cloud Sherpas also is working on several workflow applications based on the Google Apps platform.

Supporting the Partners

Google provides resellers with technical and product training and support, as well as access to tools for integrating Google Apps into their customers’ business operations. The program also provides resellers with tools for setting up business customers, provisioning end users, managing and reporting, along with integration APIs for directory synchronization, migration, reporting and single sign-on. And for the Premier Edition of the product, Google also provides support to the customer’s IT administrators.

Marketing support includes customer-facing presentations and data sheets, which are designed for the reseller to insert its logo and details. These materials already have been translated into 25 languages. Most of the sales, marketing and training tools can be found on Google’s solution provider site, or partner portal, if you will. This portal also contains a discussion forum where partners can communicate with each other about key issues and opportunities.

Resellers also will soon be able to find new clients through the Web site’s exposing capability. “A solutions marketplace exists today where we’ll be adding our resellers in a public directory-like fashion, where they’ll be exposed to potential new clients as an authorized reseller that has capability in this space,” explained Cho.

Finding a Home in the Channel

Cho said that the reselling activity is just getting under way for GAPE; and while indirect sales account for a small percentage of the overall business, he expects it to be a significant portion of the business in 2009, and increasingly so in subsequent years.

“I think we have from the beginning had a strong intent to work with the channel,” said Cho. “Our ability to serve the needs of the existing million businesses that are already with us, in terms of additional services and solutions and local folks to help companies, is something we can only do through partners; and getting to the next million businesses and the next million after that is something that is going to make it critical for us to work with channel partners around the world. It’s not something where we’re possibly going to be able to scale directly and internally with staff to meet all the customer demands and serve all the customers that we could possibly serve.”

However, many are concerned by Google’s relative inexperience with the indirect channel. Google’s Postini security products channel program has been around for nearly five years, and the enterprise search channel program has been around for a year and a half. Still, many see this worldwide reseller program launch as an unprecedented call for partners from the company.

“Google’s main experience is in the consumer space and direct sales models of Adwords,” explained Forrester’s Ried. “However, Google realized that the successful go-to-market for Apps includes local partners providing customization due to industry and local requirements. Beyond this, the integration between the cloud and existing on-site infrastructure is an issue that requires local partners.”

Cho said Google will rely on channel expertise in its existing channel teams and pilot resellers, as well as expertise in the SaaS space, to fuel the reseller program for success. “We run fast, iterate often, and we’ll develop and refine as we go,” said Cho.

“Entering the channel demonstrates Google’s commitment to the product,” said Tony Safoian, president/CEO of SADA Systems Inc., one of the pilot resellers. “So this is a positive move for the market, for the industry and for Google.”

Reception among customers seems to be quite good as well, according to the pilot resellers. “The Google Apps suite is being received by the enterprise market extremely well — companies of all sizes and industries are considering the migration to Google Apps,” said Eran Gil, vice president of business development at Cloud Sherpas. “We are seeing organizations migrate from every legacy messaging system. The employees of the companies we are working with are excited mostly about the migration. We’ve been working closely with customers from 200 users to a few thousands.”

Still, selling SaaS-based productivity applications has its challenges, and the onus of educating consumers falls to the resellers. “The market is quickly adapting to the concept of mission-critical applications moving to cloud-based solutions. We are seeing more and more companies seriously considering and then migrating to Google Apps,” said Gil. “The product is cost-effective, feature-reach, user-centric and intuitive. In addition, it provides an extensive collaboration experience for the users in an organization. All of the above and more is making it increasingly easier to sell Google Apps, and attractive to the enterprise.”

Google Takes On Microsoft

With Microsoft (MSFT) already at home in the channel, some say Google might be treading on its turf. So many users already trust and love Microsoft products; even if Google Apps is offered at a lower cost, resellers and customers will be forced to weigh out the risk of wandering into uncharted territory.

With economic concerns, among other things, analysts say the time for SaaS is now – and it appears that Google might have beaten the monolithic Microsoft to the Web-based productivity suite punch. Janet Waxman, IDC’s vice president, channels and alliances for hardware infrastructure, thinks Microsoft is probably already concerned about Google, but it depends on how each of the apps stack up directly with their competitive counterparts. “Google is so pervasive in the market … I don’t see why they wouldn’t be successful,” added Waxman.

So, what exactly does Microsoft offer in this space and how does it stand to compete?

Microsoft currently offers Office Live Workspace, which is an online extension of Microsoft Office that lets users access their documents via the Web, and it also synchronizes contacts and tasks with Outlook. In late 2008, Microsoft announced Office Web applications, which offer customers “lite” versions of Office programs delivered through the browser. The Microsoft Online Services suite — which includes Microsoft Exchange Online, Microsoft SharePoint Online, Microsoft Office Live Meeting, Microsoft Office Communications Online — is delivered as a subscription service, hosted by Microsoft.

Partners who sell the Microsoft Online suite receive 12 percent of the first-year contract value and 6 percent of the subscription fee for the life of the customer contract. And prices can vary from $2 per user, per month to $15 per user, per month — actually, Microsoft feels not taking a “one size fits all” approach is one of its advantages over Google. A Microsoft spokesperson said that the provider also does not deliver a “technology ultimatum,” and by operating under a “software plus services” approach, it lets customers move all e-mail to the cloud, stay completely with on-premise Exchange, or deploy a mix of the two.

Dr. Stefan Ried of Forrester Research said said Google is able to act very aggressively in the market since it is not cannibalizing an existing revenue stream; Microsoft, on the other hand, has to be much more careful and will, therefore, follow this “software plus service” strategy for its apps. “Windows Azure is a significant step into the cloud computing infrastructure,” said Ried; but Microsoft is “not introducing a programming paradigm required for business applications.” Windows Azure, which debuted in October 2008, is a cloud services operating system that provides developers with on-demand computing and storage to host, scale and manage Web applications on the Internet through Microsoft data centers.

“We don’t see Google Apps replacing Microsoft Office,” said Allen Falcon, CEO of reseller Horizon Info Services. “Rather, we see it extending the ability to getting information originating in Microsoft Office to team members and others.”

Reseller SADA Systems’ Tony Safoian thinks there’s no comparison between the two. “From a product standpoint, we feel it fulfills the needs of 80 percent of all employees and organizations — though the comparison is not apples to apples. The things Google Apps can do (for $50 per user, per year), Microsoft cannot do at any price — neither can IBM, Novell, Zoho, Yahoo or anyone else.”

According to a Microsoft spokesperson, one of the company’s main advantages is that its “products are based on years of technology experience to address compliance, line-of-business integration, security and support. Google is retrofitting their consumer offerings for the enterprise,” said the spokesperson.

However, said Stephen Cho, Google’s director of apps channels, Google’s ability to leverage its experience in consumer products into the business space is an advantage, and he expects to see some major success and growth with Apps because of this. “The products are ready. The customers are ready. It’s an opportunity for both Google and for partners to seriously accelerate the business,” said Cho. “Many of the channel partners are looking for a way to build an expertise and a revenue stream around delivering products in the SaaS space and services in the SaaS space. And we provide what we think is an industry-leading SaaS channel program to help them do that.”

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