SAN FRANCISCO (Reuters) - When a recruiter pitched Dave Girouard a job at Google Inc seven years ago to sell technology to other companies, he had the same question many are asking today.
“Why does Google have an enterprise business? Are they serious about that?” recalls Girouard of one of the world’s largest consumer Internet companies.
In a company where advertising accounted for 96 percent of 2010 revenue, Girouard’s role selling Web-based email and productivity software seems out-of-place — even as his team has swelled to more than 1,000 employees.
Google’s enterprise business positions it to tap into a lucrative market long dominated by Microsoft Corp and represents one way to diversify revenue. But with the giant Internet search company facing a big threat from Facebook in social networking and from Apple Inc in the mobile market, some question whether Google’s battle with Microsoft for business customers is yesterday’s war.
That point will be particularly poignant as co-founder Larry Page prepares to take the CEO reins from Eric Schmidt, a former chief of Novell, in April. While Schmidt’s business experience and perspective were shaped at a time when Microsoft was the technology industry’s dominant power, it is not clear whether Page shares the same worldview.
“It’s hard to see Larry focusing more on it (the enterprise business) than Eric did,” said BGC analyst Colin Gillis.
Google’s commitment to the enterprise business will not waver, Girouard said in an interview at the company’s headquarters last month. Page, he noted, has been involved and supportive of the enterprise business from Day One.
“We are building out a team that’s headed toward building a business of billions of dollars,” he said. “And Larry is a smart, competitive guy; he knows it’s a giant, giant market opportunity.”
Google, which generated roughly $29 billion in total revenue last year, does not break out financial details for its enterprise business, though it has said in the past that the business is profitable and generates hundreds of millions of dollars in annual revenue.
Girouard, who is the president of Google’s enterprise business, said the group’s revenue growth rate has accelerated every quarter for the past two years. Revenue is now growing faster than any other cloud-computing company, he said, including Salesforce.com, which grew 30 percent year-on-year in its fiscal third quarter.
Yun Kim, an analyst with Gleacher & Co, said investors are currently paying more attention to display advertising and mobile advertising than they are to the enterprise business as Google’s next big growth opportunities.
But he said the enterprise group allows Google to leverage its extensive network computing infrastructure and to cross-sell to many of the same small and medium-sized businesses that are already Google’s advertising customers.
The use of so-called cloud-based email by corporations is still in early stages, said Tom Austin, an analyst at research firm Gartner. But he expects that 10 percent of companies with 500 people or more will have stopped maintaining their own email infrastructures and switched to Web-based email by the end of next year, or early 2013.
“At that point we expect the market to tip and the growth to accelerate significantly,” said Austin, noting that the competition between Google and Microsoft in the online email market is closer than he had initially expected.
As it fights with Microsoft to win business customers, Google has snapped up technology and entrepreneurs.
Shan Sinha, who co-founded DocVerse, a start-up company that Google acquired last March, was recently tapped to oversee the broader set of messaging products in the enterprise business.
Weaving social networking features typically associated with consumer products into Google’s enterprise software is a top priority for the business this year.
“You’re going to see it in our messaging apps, you’re going to see it in our address book, you’re going to see it in the Docs apps. You’re going to see more social technologies make their way through all of our applications,” he said.
Google is also hoping its forthcoming Chrome operating system, intended for a new generation of Web-centric PCs, will complement the enterprise products and make an attractive package for corporate customers.
One of earliest enterprise group employees, Rajen Sheth, recently began a new role working with the Chrome team to build a version of the product specially designed for businesses.
“It’s kind of natural extension of a lot of what we’ve done with Google apps,” he said of Chrome.
Some critics have said that the success of Google’s two-year-old Android operating system — used in smartphones and tablet PCs - defeats the need for a separate Chrome operating system.
But Sheth said that Chrome will fill an important need for businesses with workers who don’t need full-fledged PCs, which are more expensive and cost more to maintain.
“There’s a lot of pent-up demand for this within businesses — to really replace desktops and replace laptops,” he said.
Reporting by Alexei Oreskovic; Editing by Kenneth Li, editing by Gerald E. McCormick