Could GM Deal be Google Apps’ Pivotal Moment?

Google Apps, Google’s (NASDAQ:GOOG) very own arsenal of application software, can make it big on a large-scale. The search giant has recently signed a deal to provide its e-mail and cloud-based software to General Motors’ (NYSE:GM) 100,000 employees. ^[1] While the deal itself is big, what is more important is the precedent it can set for other large firms to adopt cloud-based application software, threatening traditional players like Microsoft (NASDAQ:MSFT) and IBM (NYSE:IBM) in the process.

See our full analysis for Google’s stock

Big Leap for Google and the Cloud

The collaborative nature of Google Apps has certainly found favor with small-scale firms that find it affordable and convenient to share information at the same time. To provide some perspective, while Google Docs can be used freely within a small group of people, the professional licensed version of Microsoft Office 2010 costs around $350 for a single user. ^[2] However, the main perceived hurdle that has kept large, blue-chip companies like GM away from cloud-software is security. Such companies have a vast amount of sensitive data, and the mind-set until now has been to avoid exposing this information in any way to an online medium.

Consequently, the challenge for Google would be two-fold.

Firstly, all privacy concerns that might exist within GM management must be put to rest without compromise. The second and more gradual action would be ease in employees to using Google Apps, given the present stickiness they would have developed with IBM’s Lotus Notes, the current proprietary software in place. Google might also need to do some heavy customization to its existing format of Google Docs to make it more inclined towards corporate usage, considering that presently such software has been used on more informal levels.

While Google still needs to fulfill certain terms and conditions, a successful deal with a giant like GM would certainly brew interest in other large-scale corporations to incorporate the cloud. This would surely make companies like Microsoft sweat, whose application software (Microsoft Office) has been the bastion for the company so far, contributing the maximum value to its stock.

We currently have a price estimate near $628 for Google’s stock, which is around 5% above the current market price.

Understand How a Company’s Products Impact its Stock Price at Trefis

1. GM Signs Google Apps Pact, an Initial Step Towards Cloud [↩]
2. Buy Microsoft Office 2010 [↩]