Google (GOOG) announced today that it will begin charging new small and medium sized businesses (SMB) to use its cloud-based Google Apps for business software. Existing small business customers will be grandfathered in and will still have free access, as will individuals, but new business users will have to choose between a $50 annual charge per user, or a monthly $5 per user subscription. Google already generates $1 billion a year in revenue from its paying users of Google Apps.
A Paid Version is Nothing New
There are currently about 40 million Google Apps users and Google has been adding customers since its introduction in 2006. Nobody ever thought Google would keep its business software free forever and the $50 annual cost is still a bargain for businesses. Google has had a paid, premium version of its apps for business since 2007, which added such extras as extended hours for phone support, larger email inbox storage limits and additional functionality the basic version does not include.
Furthermore, any business with a user base of more than 10 people has already been paying for Google Apps, so the change is simply that the charge will apply no matter the size of a business’ user base. A possible alternative for SMBs may be Microsoft Office 365, which has subscriptions starting at $4 per user, but Google is hoping it will not lose any of its SMB users to Microsoft.
It Was Only a Matter of Time
Most industry analysts view Google’s move as a logical step. There also seems to be a consensus among analysts that the $50 per user annual charge is simply not a big deal for businesses that need the functionality the software suite offers.
An analyst with Information Technology Intelligence Consulting, Laura DiDio, said the move by Google, “was inevitable,” but she did express concerns that if Google does not offer, “…inducements, they’ll lose half the companies right away.” Charles King, an analyst with Pund-IT, said Google Apps has enjoyed, “great acceptance among smaller businesses.”
Google’s new fees may concern individuals and solo entrepreneurs more than small business owners. Even for these users $50 per year is not a big expense, but the concern is this may be just the beginning of sliding down a slippery slope of fees. Will Gmail become a paid service next? Will individual users be next in line to be hit up for a fee for using Google Drive?
Google has already hinted at possible future charges for some of its services that are now free. For example, Google Plus gives you the option to create a custom URL for your Google Plus page and it states clearly in the polices disclosure that, “Custom URLs are free for now, but we may start charging a fee for them.”
Once you start using a Google service, and you come to rely on it in your day to day life, how difficult will it be for Google to start charging you for it? Google is betting it won’t be hard at all. It’s an interesting strategy and as the ten ton gorilla on the internet, everyone is watching closely to see what’s next from Google.