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Analysis: Google beefs up enterprise apps ambitions with Postini purchase

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23rd Jul 2007
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What impact will Google's purchase of e-mail security firm Postini have on its enterprise applications business - and the overall competitive war with Microsoft? Stuart Lauchlan, news and analysis editor of MyCustomer.com, reports.

Google's been beefing up its business applications crediblity again with the purchase of e-mail security specialist Postini for $625 million cash.

Google reckons that Postini's technology will reduce security concerns and boost the appeal of its Google Apps package of hosted office applications to larger enterprises. The company will become a division of Google Apps and its technology used to secure Google Apps including Gmail, Google Docs, Google Talk, Calendar and Google's other applications.

Postini represents Google's third largest purchase, ranking behind the company's $1.76 billion acquisition of online video pioneer YouTube late last year and an April agreement to buy online advertising service DoubleClick for $3.1 billion.

"With this transaction, we're reinforcing our commitment to delivering compelling hosted applications to businesses of all sizes," says Eric Schmidt, chairman of the board and chief executive officer of Google. "With the addition of Postini, our apps are not just simple and appealing to users - they can also streamline the complex information security mandates within these organisations."

"With this transaction, we're reinforcing our commitment to delivering compelling hosted applications to businesses of all sizes." Eric Schmidt, CEO, Google

"The planned acquisition of Postini shows a commitment to penetrate the enterprise e-mail market," says Gartner's Matthew Cain. "The purchase will provide needed business features for Gmail, and thereby enhance its attractiveness for enterprises.

"Key to Google's long-term expansion plans is its drive to generate substantial revenue from enterprise customers. It has been successful with its search appliance, and it is now looking to sell personal and group productivity applications to businesses. Its e-mail service, Gmail, is the most attractive component of the fee-based Google Apps suite aimed at businesses, but the initial incarnation (released in February 2007) lacked enterprise control and security services, diminishing its appeal to the corporate audience. The uptake of Google Apps has generally been limited to small organisations.

"The Postini business model and architecture is custom fit for Google. It is an entirely hosted model where all mail is sent through the Postini network prior to delivery to the enterprise (or external recipients, if outbound). Postini also represents an attractive commercial market channel for Google. The eight-year-old company has 11 million mailboxes under management from 35,000 organisations, representing larger enterprises and small businesses — the primary target for Google Apps."

Beef up the competitive war
AMR Research's Jim Murphy also approves of the deal. "If it were just about spam and virus filtering, the deal would hardly be worthwhile," he says. "Postini's only added value would appear as a feature in Google Apps for the Enterprise. The acquisition will ultimately support Google's play for the enterprise, even its evolving play for the large enterprise.

"The acquisition will ultimately support Google's play for the enterprise, even its evolving play for the large enterprise." Jim Murphy, AMR Research

"It will act as a platform to help companies deal with existing and emerging compliance issues, especially as they pertain to e-mail communications now, and very possibly real-time communications and voice later. Mounting regulatory compliance and litigation pressures have already sent companies scrambling to corral unmanaged and unregulated e-mail, centralising e-mail stores, setting records retention policies, and standardising on messaging platforms, most often Microsoft Exchange or Lotus Notes.

"So most large enterprises couldn't begin to think of introducing yet another e-mail system with hosted e-mail stores outside of the company's control. As a hosted service backing up Google Apps, the Postini acquisition is designed to help remove this objection."

Murphy reckons the takeover will also beef up the competitive war with Microsoft. "Microsoft isn't sitting still," he notes. "Rather, it's staving off Google, along with other SaaS (software as a service) approaches and open source products by embedding itself more firmly in vital enterprise business processes.

"Microsoft is urging its partners to treat its new wave of offerings as a business platform, encouraging and equipping them to create Office Business Applications (OBA), which tie standby productivity and communications tools like Excel and Outlook with enterprise applications like ERP and CRM.

"Workflows, forms, and entire applications built in the familiar, now far more accessible and easier to integrate. The Office platform will ensure Microsoft's position on the premises, and growth in the enterprise for a very long time. Google's low-barrier approach is intended to prevent that, and quickly."

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