By QUENTIN HARDY
Earlier this week we published an article about Google Apps, and Google’s struggle to displace Microsoft Office and Sharepoint inside large corporations. While Google has worked without a large consulting partner, it should be said that several smaller consultancies are working to encourage companies to adopt Google’s cloud-based office productivity software.
Among these are Dito, SADA Systems, Appirio and Cloud Sherpas. Each offers a somewhat different approach. SADA is reselling both Microsoft and Google products. Appirio offers Google along with a broad range of other cloud services for business, like Salesforce.com. Dito is making much of moving companies to Google’s Chromebooks, which are lightweight laptops built for cloud interactions. Cloud Sherpas is among the largest consultants stressing Apps, and it claims to have moved over 1 million people to Google Apps.
Overall, these resellers are pursuing a business that initially looks like traditional reselling, but in fact works along different lines. “Moving to the cloud is a whole different model,” says Michael Cohn, the founder and senior vice president of marketing at Cloud Sherpas, “Google is offering us a recurring revenue stream.”
Consultants like him used to charge hundreds of thousands of dollars for a job like installing Lotus Notes in an IBM mainframe for a company. Now he sells Google Apps for business for the standard $50 per person per year, and gives Google $40 of that. In exchange, Cloud Sherpas aids companies in things like the migration of data onto Google’s servers, training people on the systems, and offering tips on updates to Google products, of which there can be a dozen or more a week.
The company also charges for jobs like building a button on Gmail to connect directly to an internal human resources application, which might cost $10,000, or migrating hundreds of specialty applications to the cloud system, which Mr. Cohn says could run $500,000. There is a growing business in teaching companies how to work more collaboratively in real time, as the Google+ social network becomes more attuned to business, by installing applications to manage the flow of work.
Despite these specialized payments, the important effect is making consulting much more like an annuity business, which can be very profitable if customers keep signing up and do not need too much specialized care. “This used to be a one-time margin business,” says Mr. Cohn, “now it’s about ARPU,” or average revenue per user, a term most often used by cellphone companies.
Mr. Cohn estimates there are about 2,500 independent companies and individuals involved in the Google Apps ecosystem. Google may not be able to make headway with larger consultants because the company is viewed as a threat to the existing consultancy cash-flow model.
It may also be, however, that building up a business with small developers is similar to approaches Google has used before. Its maps business gained traction by enabling outsiders everywhere to use the data via the Web. Even bloggers writing on its free Blogger service are to Google a kind of outside developer, since every page they add incrementally improves the value and quality of Google’s search engine, and creates new real estate where they might put ads. Google also likes the small Web-based developer model, since it makes it harder for Microsoft to find and target what is being built on Google products.
Google is not alone in its push for Web-based developers. VMWare is another notable company pushing open-source software and product development on the Web, possibly as a way to increase the demand for its core computer server software virtualization business. And, of course, Microsoft is trying to get there, too, with Windows Azure.
If the annuity-based payment model underpinning most “software as a service” products on the cloud also holds for these new consultants, and they gain ground, the big companies may soon have to take note.