Google's Postini Acquisition Raises Channel Questions

For the moment, Google, which on Monday announced its intention to purchase Postini for $625 million in cash as part of an effort to make its hosted applications suite more attractive in the enterprise space, is remaining tight-lipped about its plans for the 1,700 channel partners selling Postini's hosted security and email archiving offerings.

"At this point we're continuing to support and develop Postini's products," Google spokesperson Aaron Zamost told CRN. "We're continuing, obviously, to develop and support our own, while looking forward to opportunities to integrate the two. Beyond that, I'm not sure that we actually know right now what the plan is regarding the channel."

Postini's channel partners are uncertain of what lies ahead.

"I guess the real question is are they going to stick with the Postini model and is that a direction Google's going to go into?" asks Les Kent, founder of Progent, a San Jose, Ca.-based solution provider. "If Google does move in different directions or try to cut the channel out of the loop, most likely they're going to lose those accounts. The companies that have those relationships will guide their clients to other providers. The stickiness of this kind of solution is such that it's very easy to move it to someone else. "

"If the channel is generating revenue that doesn't cost them anything, why not keep it?" asks Leonard Shostak of L&D Computer Consulting in Garden City, N.Y. But if managing the channel becomes more of a headache than managing direct customers, they will eliminate it. And the channel is notorious for doing that."

"From a channel point of view, it certainly brings up question marks," notes Bill O'Brien, President of Rumson, N.J.-based Commercium Technology. "I've got a contract with Postini, and that contract can change on an annual basis, so I just have to take a wait and see approach."

It's not hard to see how Google's plans to Postini could have an enormous impact on both Postini's channel partners and the broader channel. It's much less easy, however, to determine just what that impact might be. Are messaging security solutions providers looking at an enormous new direct sales competitor? Will Google just incorporate Postini's technology into its applications portfolio while allowing Postini to pursue its current business model?

While Google already partners with Postini to resell its services, the acquisition heralds a tighter integration with the Google Apps Premier Edition package launched in February, which included online word processing, spreadsheets, and calendaring, in addition to Gmail and chat. Though Google claims more than 1000 new Apps users per day, the offering has seen very limited success in the enterprise space, in part because of limited security and compliance functionality.

"We've seen a significant amount of interest from large businesses, and this is really one of the things driving our acquistion of Postini," said Dave Girourard, Vice President and General Manager of Google Enterprise in a conference call. "Large business, like small businesses, want to deliver simple, easy-to-use applications, but they have a lot of complex business requirements behind the scenes."

Sundar Raghavan, Postini's Vice President of Solutions Marketing, argues that Google is unlikely to do away with a profitable channel program. "I can't speculate, but I don't see any reason why they wouldn't continue to cherish, and grow, and invest in the model that we have been very successful in," he says. "They have said that they intend to operate Postini as a wholly-owned subsidiary, which would mean they would allow us to run with our best business practices."

Peter Firstbrook, an analyst with Gartner, a Stamford, Conn. Market research firm, agrees. "In Google's words they are 'not buying bits running on servers, they are buying a business'. They want to scale what Postini is doing, and that includes giving channel partners the ability to sell more Google applications."

Postini's competition sees it differently. "It's almost certain that Google will eventually be looking to cut out Postini's partners," says Jos White, Chief Marketing Officer of MessageLabs, Postini's primary competitor. "Why would they not? Over time, I can't envisage Google investing in and maintaining a channel; it's just not their business model."

Google has some time to think about it. The search engine giant expects to close the Postini deal sometime before Sept. 30.