In the face of recent assertions that "the Cloud isn't enterprise-ready" or "cloud adoption is more theoretical than real right now" it turns out that the people who actually have the data say they are doing just fine. Google Enterprise president David Girouard, in a talk at Bank of America and Merrill Lynch's US Technology conference (available here) says the division is profitable and systematically moving enterprises to the service.

As might be expected, the economic downturn provides much of the motivation for recent migrations, and cost savings of between $400 and $1200 per employee versus internally hosted Exchange mail looks pretty good to cash-strapped CIOs (it remains to be seen if Microsoft's own hosted Exchange SaaS product will compete successfully with Google Apps... the product remains more expensive, though cheaper than self-hosting, but it also is much more featureful). That the division is immediately profitable isn't much surprise, either; Google wasn't taking a bath on the free version, it only stands to reason that the $50/year/user would turn into mostly gravy. And it is the e-mail driving the migrations, Girouard acknowledges: "Other products have a way to go." From a functionality standpoint, I'm not sure this is strictly true. I think it's more of a philosophical issue... Gmail is simpler and less capable than Exchange, just as Docs is simpler and less capable than Word. If you don't need the bells and whistles in your e-mail system, you probably don't need them in your word processor either, but that's going to be as much an educational project as convincing the enterprise it doesn't really need all of Exchange, either.

Unfortunately, the profitability of the Enterprise division may be one of the biggest handicaps it faces in increasing market share. The infrastructure for Apps isn't separate from the rest of the company's massive processing power, and the revenue isn't a significant contributor to the bottom line. There's simply nothing on the line for the company right now. Girouard, and Google as a whole, are too content with what progress they have already made. They aren't hungry. It shows; the Apps enterprise roll-out has been characterized by a typical laid-back "it's a beta, we're still messing with it" Google approach, and that isn't an attitude which engenders a lot of faith from CIOs. Nor does it drive innovation or customer service, factors where Google is rapidly falling behind other SaaS providers.