Google accelerates drive to sell more software

By Michael Liedtke

updated 11:14 a.m. ET Jan. 14, 2009

SAN FRANCISCO - Google Inc. is offering financial incentives to expand the sales network for the software it sells to businesses while restricting the use of a free alternative in its quest to make money on something besides Internet advertising.

Under a new program to be unveiled Wednesday, Google will sell a package of e-mail, word processing and other office applications to third-party software resellers at a 20 percent discount in the United States. It will be up to the participating merchants whether the savings are passed along to their corporate customers, said Dave Girouard, who runs Google's business software division.

Google charges a $50 annual fee per user for its premium software service, meaning the vendors will have to pay the Mountain View-based company $40 per user. Girouard suspects many merchants will maintain Google's $50 base price to help defray their own overhead and shore up profit margins during hard times.

To increase the pool of potential customers for the software, Google for the first time is capping the number of people who can use a less sophisticated, free version of the applications at 50 individuals per business.

The new limit doesn't apply to the thousands of mostly small and medium-sized companies that have already signed up for free software programs.

Schools and nonprofit organizations will still have unlimited access to the free version of Google's software programs, which are piped over Internet connections and run in a Web browser.

The delivery method, dubbed "cloud computing," is a departure from the long-standing practice of installing programs directly on individual computers owned by the company that needs the applications to help run its business.

Google is betting cloud computing can help lessen its dependence on online advertising, which accounts for about 97 percent of its more than $20 billion in annual revenue.

With the expansion into business software, Google also hopes to siphon some corporate customers away from rival Microsoft Corp., which depends on its suite of office software products for a huge chunk of its profits.

Google has been selling subscriptions to its business applications for nearly two years, relying exclusively on an internal sales team that is now approaching nearly 300 employees. Although the company has been cutting costs to counteract the effects of the recession, Girouard said Google has no plans to trim its own software sales unit even as it recruits more external vendors to sell the products.

"This is meant to supplement what we already have been doing," Girouard said. Google says more than 1 million businesses currently use its application, although most are signed up for the free version.

About 50 vendors have been approved to sell Google's software so far. Most of them are relatively small firms specializing in business software products.

More on  Google |  Cloud Computing

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