By Paresh Dave
SAN FRANCISCO (Reuters)
Alphabet Inc’s Google has struggled for years to get big businesses to embrace G Suite, its hip alternative to Microsoft Office
Microsoft Corp dominates the $15-billion market for business productivity tools for a reason: Its longstanding product is reliable and IT managers have little incentive to gamble on something new.
Still, Google has made inroads by throwing more resources at this lucrative market and finally listening to its business customers. Since Google got serious about developing features for major enterprises two years ago, the number of organizations paying for G Suite has doubled to more than 4 million, a new figure expected to be highlighted in Alphabet’s earnings announcement Thursday.
Most of those customers are small and medium-sized companies. But some big names have signed on too. Verizon Communications Inc, Nielsen Holdings Plc and Colgate-Palmolive Co alone have brought about 250,000 workers to G Suite over the past 15 months, according to the companies. Other big firms are now giving it a serious look, said Jeffrey Mann, an analyst at research firm Gartner.
“I have been talking to traditionally conservative companies in government, aerospace, financial services” that are considering buying G Suite, Mann said. “That would not have happened two years ago.”
G Suite may never be an Office killer. Just 15 companies listed in the S&P 500 currently have Google’s business tools, according to a review of public email server data by Reuters.
Its $1.3 billion in G Suite sales ranked a distant No. 2 behind Office’s $13.8 billion, according to 2016 data from Gartner.
But Mann and other analysts say that second place is not a bad spot. Smartphones and artificial intelligence have opened up new opportunities for Google to get on the radar of corporate IT departments even if it never tops Microsoft, they said. A robust G Suite is a cornerstone of Google’s efforts to diversify revenue, which overwhelmingly comes from online ad sales.
At a minimum, Google is loosening loyalty to Microsoft at a time when the Redmond, Washington-based giant also faces competition from startups such as chat service Slack that offer specialized online business tools.
Google’s low-cost, subscription-based G Suite has also pushed Microsoft to adopt a similar strategy with Office 365, an online version of its popular software
Okta Inc, a leading provider of security software, said G Suite usage among its nearly 4,000 customers rose 49 percent year-over-year in the 12 months ended Oct 31, compared to 40 percent growth for Office 365.
G Suite’s enterprise focus “is paying off,” Okta said in a report last month. Yet Office 365 remains the most popular service among Okta’s customers, hundreds of which are larger enterprises.
Among companies listed on the broader S&P 1500 index, 11.5 percent moved to Office 365 in the last two years, according to an email records review by investment firm Winton Group Ltd. That outpaced G Suite, which saw 6.8 percent of those firms come its way, including technology, industrial, entertainment and retail companies.
“They are putting people in place, but there’s still a lot of work for Google to begin growing their business in those larger accounts,” said TJ Keitt, a workplace software analyst at Forrester Research.
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