Photo: Associated Press
The vast majority of Google‘s revenues come from search advertising. As this market matures, Google desperately needs to find a new big market to dominate to keep growing. Google knows this, and they’ve dipped a toe in practically every possible area to try to turn things around, from mobile to payments to even renewable energy.
With the exception of Android, which is too early to call, few of these endeavours have shown much success so far.
The one area which we think has the most promise is cloud-based enterprise apps. As the enterprise slowly moves from software to online services, Google is poised to capitalise on this trend.
It is still early days, however. Google makes a suite of web-based applications for the enterprise, which have seen some uptake, but are largely ignored by the enterprise. Google Docs just can’t compete with Microsoft Office on features, and while it’s better at collaboration, that advantage will vanish as Microsoft moves these features to the cloud.
In fact, there is only one company which has successfully built a cloud-based enterprise applications business: Salesforce.com. Salesforce’s products are great, and it is a successful, path-breaking company.
We believe that if Google wants to become a significant player in the enterprise market, it needs to buy Salesforce now, at whatever price. Salesforce is already expensive as a stock, and Google would have to pay a significant premium over that, and possibly go hostile as founder and CEO Marc Benioff won’t sell easily, but we still feel it’s worth it.
- Google isn’t a dominant player – far from it – in enterprise apps, and cloud-based enterprise apps are themselves a nascent, not advertising-related market, so there would be few antitrust issues.
- Google would acquire a beachhead in the enterprise. Selling software to the enterprise is one of the toughest nut to cracks. It is a minefield where relationships and incumbency matter a lot. By buying Salesforce, Google would all of a sudden have many Fortune 500 companies as customers and would acquire the significant relationships with basically all the CIOs of the world’s largest companies (even though not all of them are customers, all of them are familiar with Salesforce by now), an asset which is basically invaluable given how hard it is to get. Given that Google’s main rival in this space is Microsoft, who already has great enterprise relationships, buying them than wasting time on building them could make all the difference. Google’s strategy in cracking the enterprise nut so far has been to go from the bottom up instead of the top down: push individuals inside the organisation to use the products, who will then lobby for wider adoption. This is a smart strategy which has worked in the past for other products, but given the time and competitive constraints, Google needs to do much more in a big way.
- Google would acquire a sales culture. This is what’s most important to us. Along with leadership, culture is the single most important factor in a company’s success. Everything else derives from it. Google has an engineering culture, which is great, and it has plenty of salespeople, most of whom we’re sure are great, but having great salespeople is not the same as having a great sales culture. Google’s advertising products basically sell themselves, they’re so effective. This does not at all create the same culture as having to fight tooth and nail to bring the conservative, risk-averse IT departments of large corporations on board with a new, innovative product. Benioff is a technology and product visionary, but he’s also a relentless salesman down to the last fibre of his body, who has built a fantastic, sales-oriented culture at Salesforce. Google needs to add that scrappy, hungry sales mindset into its DNA. It could be argued that Microsoft’s tremendous past success is due to the fact that it was able to marry two often incompatible cultures: a great engineering culture and a great sales culture (each embodied by Microsoft’s historic leaders, Bill Gates and Steve Ballmer), which allowed it not only to churn out proficient products faster than anyone else but to pummel its competitors in the marketplace with superior salesmanship. Google needs to take a page from the Microsoft playbook.
This means that Google shouldn’t try to integrate Salesforce. The Google enterprise business should be integrated into Salesforce. If Benioff can be brought on board – and in fact this may be the only way to bring him on board – he should be given responsibility for all the enterprise business, with limitless resources. His vision of cloud-based enterprise apps is largely the same as Google’s, and like them he understands the power of things like APIs. Benioff should only have to answer to CEO Eric Schmidt and be given carte blanche. He has the product vision to overhaul Docs into a worthy Office competitor. If he wants to pluck a superstar engineering team from another Google department to bring them on board, he should be able to do so without asking anyone’s permission.
If Google can pull off something like this, then we think they’ve got a great shot at building a business as big as search in enterprise apps. If not, to be honest, our money is on Microsoft, Oracle and Salesforce.