Google Enterprise search, apps offer 'better margin' than Microsoft

Google APIs, enterprise search offer more high-margin services work than Microsoft software, partners say.

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Google Inc. is new to formal partnership programs. But some IT solution providers are finding high-margin opportunities knitting Google Enterprise search into corporate infrastructures -- even though they cannot (yet) resell Google applications.

In fact, some channel company execs said they are able to make better margins using Google Enterprise search and Google application program interfaces (APIs) for integration work than they can selling and integrating Microsoft software.

A handful of reseller partners said they make between 15% and 25% profit on sales of the Google Search Appliance, a box that brings a Google Enterprise search engine inside a customer's firewalls. More importantly, they can make more than 50% margins when they use their Google API expertise to "Google-enable" company applications.

This may come as a shock to resellers who think Google is the poster child for a Software as a Service (SaaS) model that will cut "middlemen" out of the sales process.

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As Google has moved up the ladder from consumer-oriented search to business-focused applications -- notably the $50-per-user-per-year Google "Premier" apps -- incumbent software providers such as Microsoft chief operating officer Kevin Turner have warned their channel partners to remember who their real friends are.

However, even the staunchest Microsoft value-added resellers (VARs) maintain that margins on Microsoft goods -- and the company's focus on volume sales rather than high-margin solutions -- has thinned margins on product sales and services alike.

Ricis Inc., a Tinley Park, Ill.-based partner with expertise in search, email and collaboration, sees a big upside in Google work. The company resells the Google appliance and claims up to a 25% margin on it. But the real money is in the related services -- including work with the Google API, on which its margins are 54%, according to CEO Gregory Rosenberg.

The Google Enterprise search connector framework, a set of APIs, "lets you wrap other functionality around the stuff Google does in their core code," Rosenberg said. "If you want to build custom metatags or do special cross-selling driven by cross-site indexing models, you can do that," he added.

If a client company has multiple divisions and Web sites, Ricis can ensure that a customer searching one site will see search results from related companies as well.

VARs also use Google APIs to integrate Google Enterprise search, Google maps and other applets into customer Web sites.

One reason for the premium price is that relatively few VARs have Google API expertise compared to the tens of thousands of companies with skill sets in .NET and Microsoft Information Worker.

"It's supply and demand. You don't make margin selling Microsoft software. You don't make money selling Google software. But the difference is that Google expertise is relatively rare and people will pay for it," according to one long-time Microsoft solution provider, who asked not to be named.

"If [Google consultants] make 54 points on services, they're printing money. We're lucky to make 35 points on .NET services. If we quote $175 an hour for .NET programming, some local will come in and quote $145," he said.

In sales margins, large account resellers (LARs) said they see 6% margins on volume sales of Microsoft software -- if they're lucky. Top-tier Microsoft Business Solutions partners can make up to 48% margins on ERP sales, but that is under pressure as well.

Michael Cizmar, founder and president of MC+A, a Chicago-based boutique VAR specializing in search, portals and information management, works with both Microsoft Sharepoint and Google Enterprise search and applications, but has bet on the latter.

"I think Google is good for VARs. Whether it's the canned product or a Software as a Service, there is huge business opportunity for integration. SaaS by its very architecture requires integration [with in-house processes and information]," Cizmar said.

MC+A implements Google technology for others and uses it internally. "Our workforce is spread out. We don't want to focus on having a bunch of IT people maintaining our systems for the classic reasons, " Cizmar said. "We work with Sharepoint and Office and do a lot of document sharing, but the best feature of the Google apps is that you can work at the same document at the same time."

Google's buzz is gaining it entry into small businesses, even without a ton of marketing per se, Cizmar said. He thinks business adoption will increase when Google Gears offers offline support.

The small cadre of current Google partners -- those who can resell the appliance -- are "screaming" for a piece of Premier applications as well, Cizmar said.

There is also an opportunity for migrating existing Google appliance customers, now on the low-end Google Mini version (ranging from $2,000 to $9,000), up to the $50,000 enterprise appliance.

But the bottom line is that VARs are "not in the business of selling boxes."

"We're in the business of solving problems with solutions, and the Google APIs provide a unique way to solve problems," Cizmar said.

While Premier applications are not offered through partners -- yet -- that does not preclude smart VARs from including them as part of a solution.

Rosenberg estimates that his company, which sells Scalix and other mail solutions, has lost six or eight accounts during the last few months to competitors using Google Apps; but his company was hired by many of those accounts to provide related services. "Domain and integration expertise is our calling card," he said. He now has 18 or so customer sites running Google applications as part of a broader solution.

Google's pre-existing connector API framework was recently bundled up with the new Google Appliance version 5.

According to Rosenberg, for very small companies, going with Google apps is a no-brainer. He said a typical scenario goes something like the following.

A startup goes to Intuit Inc. for an online Quickbooks service account. Then they go to Google for mail, word processing and spreadsheet capabilities. Then they either use Google Checkout or PayPal for online payment processing. "For small companies this means no IT infrastructure maintenance costs and no IT staff, but maybe a consultant to help set it all up," Rosenberg said.

It is those consultants with domain and integration talents that can reap the benefit of growing up with those small companies. The big battle for them is looming, with more Microsoft "Live" services coming online even as Google bulks up its business apps.

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