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Enterprise who? Google says little about Apps, business cloud services in Q1 report

Juan Carlos Perez | April 21, 2014
Google did little during its first-quarter earnings report to shush critics who say its Enterprise unit is a second-class citizen in its kingdom.

Google did little during its first-quarter earnings report to shush critics who say its Enterprise unit is a second-class citizen in its kingdom.

The company gave no substantial details regarding overall sales trends for the Enterprise business, nor for individual products such as the Google Apps cloud email and collaboration suite, the Compute Engine IaaS (Infrastructure-as-a-Service) tool and the App Engine PaaS (Platform-as-a-Service) offering.

Top IT and business executives pay close attention to how well the products of their existing and prospective vendors are doing, to make sure they don't invest in wares with uncertain futures.

"I think CIOs would like to see Google report [Enterprise unit] revenues in more detail so they have a better sense of Google's commitment to their market," said Forrester Research analyst Ted Schadler.

Google could accomplish this via an authorized disclosure from Enterprise unit president Amit Singh or via an official filing with the U.S. Securities and Exchange Commission, Schadler said via email.

Most of Google's revenue comes from online advertising, so its quarterly earnings filings and conference call understandably focus on that business, but the company could provide better clarity and more specific information about the financial performance of its enterprise products.

After all, millions of companies, government agencies, schools and commercial developers pay to use those products and have made a strategic bet that Google will stand behind them for the long run.

In the enterprise collaboration market in particular, where Google Apps faces Microsoft's increasingly strong Office 365 suite and wares from other large vendors and startups, "product alone" isn't enough to win the battle for customers, said Alan Lepofsky, a Constellation Research analyst.

"In a market where transparency is one of the primary tenets, customers want to know the vendor they are dealing with is financially stable. When a publicly traded vendor does not provide details of their enterprise software business, it does not tell a convincing story," Lepofsky said via email.

The question of how committed Google is to its Enterprise business is persistent and inevitably flares up when, as with Wednesday's earnings report, Google misses Wall Street estimates. Critics and competitors sometimes float the idea that if Google had to cut costs, it might target the Enterprise group.

So, how difficult is it to get a handle on Google's Enterprise business sales performance? For starters, it's included in a revenue category labeled Other with a mishmash of other non-advertising, consumer products.

In the first quarter, the Other category's revenue was $1.6 billion, up 48 percent year on year but down 6 percent sequentially. It represented only 10 percent of the company's total revenue.

What products drove the Other category's growth? Consumer sales of apps and digital content such as books, movies and songs in the Google Play store, along with sales of Chromecast, a consumer digital media player device.

 

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