Price Comparison- Hidden Cost

Complex Licensing: Hidden Costs in Total Cost of Ownership (TCO)

Google Apps for Enterprise is licensed in a straightforward per user/year manner. This means customers can easily understand and forecast how much they will be spending for providing communication and collaboration benefits to their users. It also means that if a company were to go through a reorganization or divestiture in the future, it can instantly scale back on these IT costs.

To match the functionality that Google Apps for Enterprise provides, our competitors need to sell a myriad of products in complex licensing arrangements that take a specialist to understand and negotiate.



Most importantly, it also means two things:

Shelfware.
When companies do not fully understand the licensing options and complexities of the software they are buying, or when they are forced to buy the same program for everyone in their organization to attain a certain “discount level”, the company will most likely overpay and not fully utilize what they purchased.

Flexibility.
Our competitors require their customers to sign-up in advance for a specific number of users – for a number of years. If the customer underestimates the number of licenses they will use, then the vendor can penalize them with steep compliance fees. Conversely, if a company buys more licenses than what is ultimately used, then it has over invested in this solution and cannot recoup the overage from the vendor.
With Google Apps for Enterprise, customers do not face these problems since licensing is straightforward, there are no hidden costs, and if they ever need less or more licenses than what was originally purchased, we adjust pricing accordingly in real-time.

Analyzing the Google Offering
To provide a common ground upon which we can compare our offering to our main and biggest competitor we need to break down and regroup the Google Apps for Enterprise offering so it is clear what competing products the customer would need to buy to match the same functionality.

The Microsoft TCO
Let’s take a look at the Microsoft components:

E-mail and Calendar.
E-mail and calendar functionality is provided by Exchange (and Outlook as the client). Exchange licensing has two components: server price and client price. That is, companies must pay for the right to use the Exchange software in the server, and then pay an additional price for each employee that connects to that server. The bulk of the price is in this later connection fee, called a CAL. According to a study published my Microsoft the average cost of running Exchange is $3061 per user/year.


Antivirus and Antispam.
One key differentiation point for Gmail is that it already comes with antivirus and antispam protection. Almost all Exchange customers will supplement their deployment either with a Microsoft product, such as Antigen, or a third-party product that could cost $12 per user/year2. Also, the recently acquired Postini Message Security and Compliance solutions are included with Google Apps at no additional charge.

See table beside for the cost in Microsoft solution.

Instant Messaging.
Microsoft’s Instant Messaging solution is called Office Communicator. It is licensed in a similar fashion as Exchange – with a server price and a CAL price. The software-only cost for this solution is about $253. This does not include any hardware acquisition or maintenance costs.

Documents and Spreadsheets.
This is the traditional Office client. The average price customers pay for their Office licenses is about $83 per user/year.

Sharing and Collaboration.
One of the greatest differentiators of Google Apps is the ability for users to easily share and collaborate with Google Docs and Spreadsheets and the recently added Google Sites solution. In the Microsoft world, to somewhat achieve that, customers need to buy SharePoint. But even then, SharePoint does not provide real-time multi-user collaboration, nor can it be accessed anywhere/anytime. SharePoint is also licensed under a server & CAL model. Most users would end-up paying about $20 per user/year to use SharePoint. This does not include any hardware acquisition or maintenance costs. The new Google Sites solution now provides greater collaboration capabilities that are similar to the SharePoint solution. Sites allows customers to share any type of content both inside and outside (if desired) the enterprise.

Storage costs.

Digital content being sent and shared in the form of e-mails and documents is exploding. The bad news is that for Microsoft customers, it is incredibly expensive to provide the amount of storage to keep up with this ever increasing demand. The Microsoft-sponsored study assumes a storage cost of $0.35/MB. Google Apps for Enterprise provides 25,000 MBs of email storage. Additionally, Google Sites provides 10,000 MBs of additional domain storage for shared documents PLUS an additional 500 MBs of storage per Google Apps user that can be utlized.




The Google TCO
While our licensing cost is only $50 per user/year there are costs associated with using the Google solution that are not reflected in that price. For example, while administration costs are significantly lower than for the Microsoft-comparable solution because of our hosted model. Customers must still dedicate someone to administer accounts, or to write and maintain the program that uses our API to do so. Other costs include migration, training, downtime costs.






In summary, the non-licensing costs of Google Apps for Enterprise are:








Source:
1 Microsoft Exchange 2003 Total Cost of Ownership. The Radicati Group. November 2003. This number is calculated by taking the 3-Year Average Messaging and Collaboration TCO per User/Year (in page 4), subtracting Storage cost per user, $10.50 (calculated separately) and then adding the Total Messaging Server Platform Cost (Hardware and OS) cost, divided by 3 (assuming 3 years) (page 13), $20.06.

2 Antigen Messaging Security Suite cost. Retails for $1.25 per user/month. Assuming 20% discount.

3 Based on Retail CAL cost of $31. Assuming 20% discount. Neglecting server cost since only a few may be needed even for a large install.

4 These are incurred in the first year only, for comparison purposes, they are spread over a 3-year period. This figure is based on Table 6 of the Radicati study – and taking only the “major upgrade” portion into account; assuming 1,675 hours to perform the initial migration.

5 Assuming same training costs.