Will Google Enter the CRM Market?

Through the success of Google Apps, Google has has emerged as an enterprise apps contender. While their success to date has largely been with SMBs and early cloud adopters, the momentum is evident. Initially, Google targeted personal productivity and collaboration – Gmail, Calendar, Docs, etc. However, we’re wondering how long it will be before Google drives deeper into the enterprise. For example, will Google enter the customer relationship management (CRM) software market?

In 2010, Google stepped up their apps strategy with the Google Apps Marketplace, an online store offering business applications which integrate directly with Google Apps. The Marketplace lets businesses administer everything from finance and project management to CRM – all from Google’s single sign-on infrastructure. By positioning themselves as the provisioning hub in this ecosystem of cloud applications, Google gains considerable leverage to gauge the demand and utilization of applications.

Although Outlook and Exchange are still the dominant solutions for enterprise email, CRM analyst Brent Leary says more and more companies are requesting Gmail integration from their CRM vendors. Integrating a CRM app to your Gmail is certainly helpful, but what if Gmail was your CRM? Let’s weigh the likelihood of Google making this bold move.

Signs Pointing to Yes

Google already has the building blocks
Arguably the most important aspect of CRM is that middle part – relationships. Some small businesses and start-ups have realized that Google, as a communication platform, is great for managing relationships. Gmail is an excellent resource for email and contact management. You can even use custom fields within each contact to document notes on past interactions or tag the contact as a lead. From there, you can do basic segmentation for an email campaign.

Along the same lines, Google Calendar and Tasks are excellent tools for managing opportunities. And because the Google Apps work together, information logged in one App is tracked in the others. For example, when two Gmail users exchange emails, Google can connect them in Google Reader. This could be useful for companies in learning more about their customers’ interests. Android, Google’s mobile operating system, positions the company especially well to deliver on the ubiquitous mobile deployment requirements in CRM.

Give the people what they want
Though Google CRM does not yet exist, the demand does. According to Google’s blog, CRM is the #1 most searched-for term in the App Marketplace. While enterprise applications such as supply chain management and enterprise resource planning are typically adopted by large enterprises, CRM is commonly used by the smallest of organizations.

Demand for cloud-based CRM is particularly robust; cloud adoption in CRM outpaces other application categories. According to a press release from Gartner in December 2010, the on-demand CRM software market grew from less than $500 million in 2005 to $2.3 billion in 2009. That’s an average annual growth rate of 49%. In business, it’s all about the numbers, and for CRM the numbers are looking pretty good. It might be time for Google to capitalize on this booming segment of enterprise software.

Build or buy?
So how would Google go about entering the CRM market? They could develop a CRM system from scratch by assembling the building blocks we mentioned above. Google has plenty of developer talent, and massive infrastructure to support new applications. Without too much trouble, Google could extend its personal productivity apps to target basic CRM opportunities.

However, a more likely route is through acquisition. Google has proven to be highly acquisitive. In 2010 alone, Google acquired 11 social media-related companies. Why is this significant? Because “social” is a highly buzzed-about word in CRM. The addition of a social layer to their existing collaborative apps positions Google well to capitalize on that buzz.

Not So Fast…

Google’s Salesforce partnership appears solid
Many analysts predicted that Google’s partnership with Salesforce in 2007 was setting the stage for a purchase of the CRM vendor. Brent Leary predicted it back in 2006… and again in 2007. But no wallets have been pulled out. Instead, the companies have tightened their integration and continued the partnership. If Google had ambitions to enter the CRM market it seems they would have done so already. Any alternate move Google might make in the CRM space would likely damage their partnership with Salesforce, while failing to bring meaningful market share.

A change in leadership signals a change in strategy
Leary made his predictions of a Salesforce acquisition before Google’s recent CEO shuffle. Prior CEO Eric Schmidt was previously CEO of Novell, and before that CTO of Sun Microsystems. Enterprise software is in his DNA. The new CEO, founder Larry Page, is an ad man. Well, he’s a search genius who figured out the ad thing pretty darn well. Many have questions whether Page will remain committed to enterprise apps, given his predisposition to search and ads. Paul Greenberg says, “If Eric Schmidt was still the chief there, I would probably say, ‘You know, maybe they would want to go into the CRM market.’ But when push comes to shove, Larry Page doesn’t know the enterprise.”

Although cloud-based CRM is a $2.3 billion market, Google made over $28 billion in advertising last year. With the creation of the Apps Marketplace, Google is allowing players from all over to integrate with their strong provisioning platform. Because of this, they can expand their offering to Google App users, while keeping their primary focus on the cash cow, ads.

The Verdict

There is a lot of potential for Google as a CRM vendor. Laurence Buchanan wrote some interesting thoughts on what Google CRM might look like. Then again, they might be gun-shy when it comes to attacking new business apps. RIP, Google Wave?

I predict Google will keep dipping their toes in the CRM pool, but they will do so in a novel way. I believe they will extend their current apps to include more CRM capabilities, but most of these functional enhancements will center on social interactivity. This approach feels more strategic, and will make their platform more appealing amidst the new wave of social media.

A special thanks to Brent Leary, Paul Greenberg, Mitch Lieberman and Dan Waldschmidt for lending their expertise.