IDC doubts enterprise appeal of Google-Postini

In a bid to make its hosted applications offering more attractive to enterprise customers, Google Inc. plans to buy messaging security and compliance provider Postini, but one Canadian analyst doubts the move would make that much of an appeal to large businesses.

“To be honest, I don’t know if it makes it more appealing to large enterprises. It’s probably more appealing to small enterprises,” said Sebastien Ruest, vice-president of services research at IDC Canada.

With the reported US$625 million acquisition deal, the Mountain View, Calif-based Internet search giant will have access to Postini’s range of security and compliance technologies, including message archiving, security, encryption and policy enforcement.

Postini offers its line of tools as a hosted business model, which can complement Google Apps, a suite of hosted office applications including Gmail, Calendar, Talk, Docs & Spreadsheets and Personal Start Page.

“It’s part of the long-term strategy where Google is really targeting small and medium sized enterprises. It goes all the way back [to] when they released their Google Apps bundle and even their other devices a year or so ago,” Ruest said.

Providing technology through a hosted model has a bigger appeal to small and mid-sized businesses and other non-profit organizations with smaller IT budgets and IT staff, the IDC analyst said. Often, they have to make decisions about which areas of their IT environment they have to invest in, he added.

A huge number of Google Apps’ 100,000 users are small businesses, with more than 1,000 signing up for the service every day, according to Dave Girouard, vice-president and general manager for Google Enterprise.

That might change, however, with the acquisition of Postini, which has about 35,000 customers, including some big-name enterprise clients like retail chain Circuit City Stores Inc., Business Objects, Mitsubishi Motors, the National Hockey League and financial management firm Merrill Lynch. In a statement, Girouard said security and compliance were part of the reason why large businesses have been reluctant to adopt hosted applications.

“By adding Postini products to Google’s technology, businesses no longer have to choose – employees get the intuitive product they want, and the company achieves the security and assurance it needs,” said Girouard said.

Echoing the Google executive’s comment, Ruest said despite the increasing popularity of hosted or on-demand-type IT services, one of the major concerns about this model is on security.

With a hosted model, he explained, customers don’t have the same type of controls nor dedicated staff as they would with an on-premise application. “You have to rely on the reputation or security and compliance level of that (hosting) organization,” Ruest said. On the other hand, security and compliance can be challenging for an organization with little IT budget, he said.

“Security and compliance are tricky because they require added level of skills and you’re always looking for more experienced staff,” which makes hosted security and compliance an appealing proposition, as customers don’t have to invest in maintaining the infrastructure and the skills, Ruest said.

Google executives said the merger would turn Postini into a wholly-owned subsidiary of the Internet search giant, a decision industry observers believe was a good call.

“Usually, Google will be in a position to buy or build. By buying [Postini], it shows that they wanted to do this quickly and they felt confident with Postini’s technology,” said Dana Gardner, an analyst at Interarbor Solutions LLC in Gilford, N.H.

Postini is Google’s second security-related buyout in recent weeks. Last May, the search giant confirmed its acquisition of security software vendor GreenBorder Technologies.

–With files from IDG News Service

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