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Google's Reseller Road Ahead: Pluses And Minuses

Google must overcome Microsoft's vast channel expertise and experience to build its own Google Apps Premier Edition reseller program. Here's a look at some pluses and minuses the company faces.

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But lost in all the hype around the launch of the Google Apps Premier Edition reseller program are the channel advantages that Microsoft brings to the table with the hundreds of millions of dollars in channel incentives, market development funds (MDFs) and joint marketing, along with thousands of field reps engaged in the sales trenches and tens of thousands of employees that touch the channel day in and day out -- not to mention the hundreds of millions of dollars Microsoft spends each year in marketing air cover.

Keep in mind that Microsoft is one of the pioneers of the reseller channel. The software giant has invested billions of dollars over the years into a channel organization that has been championed by both Microsoft CEO Steve Ballmer and Microsoft Chairman Bill Gates along with seasoned, top-notch channel talent, including Worldwide Channel Chief Allison Watson, one of the greatest channel chiefs of all time.

That type of channel leadership, ensuring robust channel investment and aggressive channel programs, is the difference between success and failure in the channel -- all of this backed up by a formidable channel budget.

Google, on the other hand, is a channel newcomer that has only a handful of partners and spends relatively little on supporting the channel with field reps, market development funds or joint marketing to customers. Google has deep pockets and it remains to be seen how much the company will open its wallet to garner the attention of the channel.

Stephen Cho, director of Google Apps channels, a newcomer to the channel, refuses to talk about how many channel employees Google has in its stable or how much the company intends to spend to support its partners with channel program basics like market development funds or joint marketing funds. While Cho is playing it close to the vest, he needs to understand that VARs will want specific answers to those questions before committing their time and resources to Google. It's just the law of the channel.

Remember, Google's Apps and channel effort is barely a blip on the $20 billion company's revenue or net income line. Compare that to Microsoft, which derives at least 90 percent of its $60 billion in annual sales from the channel.

Cho says that Google's Enterprise Group, which owns the Google Apps business and the search engine appliance business, has a mere 600 employees and accounts for hundreds of millions of dollars in revenue. That's a far cry from $54 billion in channel revenue on the Microsoft side. But in this economy, every company is looking for pockets of growth or incremental revenue opportunities.

With all those numbers in mind, here are a look at the pluses and minuses of the Google Apps Premier Edition Reseller program.

THE PLUSES

1. Outstanding Technology And A Great Product

By nearly all solution provider accounts, Google Apps is a robust, yet simple, platform that is easy to deploy in both small businesses and enterprises. And it's scalable enough to support a company's growing needs. Google has done a great job fielding a full-function cloud computing Office productivity suite. Microsoft has clearly held back here in a bid to keep the standard Office productivity suite as a cash cow.

As it stands now, Microsoft is not set to offer Office Web Applications -- lightweight versions of Word, Excel, PowerPoint and OneNote accessible through Web browsers -- until the next version of Office, which is due sometime in early 2010.

2. The Google Brand

Google has developed great brand in the Web 2.0 world. It is the leader in providing the undisputed best search technology in the world for the Internet. It's hard to bet against a company whose name has become a verb. No one's ever said, "Yeah, let me Office it to you." Google, of course, is attempting to leverage that brand with a Google-authorized reseller logo program.

3. Get Googled

Google plans to include a reseller listing on the Google Apps site, allowing potential customers to find you before you can find them. In the age of Internet searching, that's a plus for solution providers looking for new business.

4. Recurring Revenue

Recurring revenue is the word for the 21st century VAR. That's why managed services are hot. Businesses want monthly, predictable subscription billing for all their technology needs, not just Internet and cell phone services. Granted, no one is going to get rich from the $10 profit on a $50-per-user annual fee on Google Apps Premier edition. But, once again, predictable recurring revenue is king and this is a way to get there.

Remember this full cloud computing office productivity suite segment is an area where Microsoft is, to some degree, sitting out until 2010. Bad move, Microsoft.

5. Services Opportunity

You won't get rich selling the Google Apps software, but make no mistake about it, there is a lot of money to be made setting up the cloud and managing a secure end-to-end, cloud computing environment for customers. Consider that solution provider margins on the standard Microsoft Office productivity suite are also negligible. Services is where it's at. Services. Services. Services.

THE MINUSES

1. Low Channel IQ

Nothing against Stephen Cho, the Google executive charged with leading the Google Apps channel program, but starting a reseller program from scratch is not easy. Expect some growing pains as Google learns what solution providers need.

Google does not appear to have assembled a channel-savvy team as it takes the reseller plunge. Not a good sign when it is looking to build a channel of tens of thousands of partners to go up against Microsoft. Google's hubris is not something that channel partners are going to appreciate. Some signs of the low Google channel IQ: The search giant has not assembled a partner advisory board, partner conference or regional road shows.

2. No Deal Registration

Google expects solution providers to add their own value to entice customers, but watch your back for someone willing to grab the deal at the last second. Not a good sign given that we're talking about a $10 margin on a $50 annual subscription fee.

If CDW and some of the other reseller giants get into the game then expect what is likely to be an untenable situation for solution providers trying to get off the ground with Google. They're spending a lot of time selling, only to have the rug pulled out from under them at the last minute by either a big player, another partner, or even Google itself jumping in and giving the product away for the services opportunity.

3. A No Tier Channel Program

One of the best ways to grow stronger, more loyal partners, is to feed leads to your best and your brightest. Because Google doesn't know who those companies are yet, some leads may fall to inferior partners. Most vendors have tiered channel relationships for this reason. The more you invest as a partner, the greater your reward.

4. Negative Cash Flow

Google expects to be paid in full for a year-long subscription up front, even if the VAR decides to charge customers monthly or quarterly. With more end users opting for a bill spread over a longer period of time, solution providers must weigh charging in full up front, or ensuring they have the right cash flow to float the business throughout the year until they recoup all the costs.

5. No Distributor Participation

Google expects to significantly increase its number of solution providers in 2009, but it's missing the boat by not leveraging distribution to do this. For one, distributors have long earned VARs' trust, which eliminates concerns about channel conflict with Google's direct sales force. Google already has relationships with distributors for its Search Appliance. Why not expand those relationships?

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