For far too long, Google has been playing catch-up to Microsoft in the business productivity segment. According to numbers released by analyst firm Gartner, Microsoft still holds close to 90% of the market with its Office suite of products. But the silver lining for Google is in the cloud-office space where the research firm predicts a market share of at least 33% for Google.
Online Advertising Space
There are several things going right for Google at the moment. Firstly, enterprises are still warming up to the idea of hosting their data in the cloud. Analysys Mason in a report published earlier this year predicted the enterprise cloud business to grow at an annual growth rate of 17%. To a majority of the companies that are new to cloud, their prior reliance on MS Office should not be a deterrent while exploring Google as a viable alternative in the cloud computing space. Secondly, Google is a mammoth in the online advertising space. Consequently, they have an advantage over competitors in offering ad-supported freemium models that is highly welcome among the micro small and medium businesses to whom the existing productivity suites are a tad expensive.
As Google consolidates its position in the enterprise productivity segment, one question that often keeps popping up is whether the company has set already its sights on the ERP segment. It is not difficult to see why. According to a recent survey by IDC Insights, 25% of small businesses are already in the process of setting up cloud ERP while another 20% are seriously considering the move. It is a pretty well-known fact that businesses have a huge inertia to change when it comes to deploying IT infrastructure.
We are today in a very interesting time where close to half the small businesses are overcoming this inertia to explore a move to a new infrastructure.Companies in the ERP segment are thus seeing this as a now-or-never kind of a scenario to gain a whole new segment of customers. The biggest names today in the traditional ERP space like SAP, Oracle and Sage now offer alternative ERP offerings on the cloud. In doing so, they are competing against the pure-play cloud ERP providers like NetSuite, Plex Systems and Infor.
Given the transition, Google might see this as the most opportune moment to venture into the ERP segment themselves. There are quite a couple of reasons why this may be the case:
Consolidation In The Enterprise Cloud Space
The enterprise SaaS segment constitutes primarily of business productivity suites and ERP. Google already is in the process of establishing itself in the productivity segment. By not offering an ERP service, the company may lose out to the likes of Microsoft who have a whole umbrella of products to offer to small businesses in the form of Office 365 and Microsoft Dynamics. Unlike the traditional systems where companies did not mind deploying software from multiple competing providers for their different requirements, one of the focus areas for businesses when it comes to transitioning to the cloud is consolidation of their data. This means, businesses looking for cloud services will inevitably look at one provider who can service their multiple requirements.
Google’s Pricing Strategy
The pricing strategy of legacy ERP providers has always been skewed against the cash-strapped small businesses. Cloud-based ERP is seen as a cost-effective alternative and that is one reason why close to 45% of these businesses are looking to transition to the cloud. Regardless of how the price wars pan out among the various competitors in the segment, Google can afford to beat competition on price; at least for the micro-small businesses. The company has traditionally offered free ad-supported services to businesses in the enterprise space and they are likely to deploy a similar strategy for ERP as well. Given Google’s dominance in the online ad space, the company is likely to pull out a better pricing deal to small businesses than any other competitor.
Google’s entry into the cloud-based enterprise resource planning segment may be the most disruptive factor that the ERP industry has seen in a while. Mountain View itself has not given any indications about their plans as yet. However, given that the market conditions are so massively tilted in favor of Google, we wonder if the world’s most popular search engine company could finally make its foray into the cloud ERP by next year. What are your thoughts?
By Anand Srinivasan