Internet Player's Software Plans

Google is perhaps the most stunning technology success story ever, but we simply don't believe Google has the rational business incentive to get too deep into the business/IT software category. The lower revenue and profit per employee figures would be tolerable if there were huge growth opportunities there, but when very successful companies like Adobe and Intuit pull in revenues well shy of a Yahoo, when even the enterprise software leader SAP is smaller, and slower growing than Google (Google makes nearly as much in profit per employee as SAP or Oracle Salesforce make in revenue per employee), it is fairly clear this market is not going to make a material contribution to Google's growth and profitability objectives. So what is Google's plan here? It is fairly obvious they are in it to put Microsoft on the defensive on its home turf, so that Microsoft's offensive capability in the internet is diminished. It is also perfectly clear why Microsoft wants to be an internet player - as Google has shown, it is a higher margin business even than its monopoly-profit core business.

So why is business software so much less profitable than the internet? I can think of two reasons: a) purchasing departments that know a thing or two about supplier margins and specialize in putting the squeeze b) sales and support costs, particularly support costs. When you sell software to businesses, they have all kinds of support expectations, which adds to headcount. A search engine or a news portal isn't expected provide any customer support.

Sridhar