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5/26/2005
02:01 PM
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Interview: Google CEO Eric Schmidt Talks Business Technology

The strategy involves putting more of Google's Web site capabilities into low-cost appliances for the workplace.



Following the introduction of the Google Desktop Search for Enterprise software at the Gartner Symposium ITXpo in San Francisco on May 18, Google CEO Eric Schmidt sat down with InformationWeek's Thomas Claburn to discuss his view of the business-technology market and how Google might change it. Dave Girouard, general manager of Google's enterprise business, was there, too. The interview began with a question about IT productivity, following Schmidt's public comments earlier in the day about "end-user dissatisfaction with IT."

InformationWeek: Can IT continue to delivery productivity gains?

Schmidt: Let's imagine you're a CEO and you're running a sales force. How can you get your sales force to generate more revenue? Get them more educated, more trained, better tools, better multimedia tools, better account planning, better management—sort of CRM on steroids.

InformationWeek: The other day I was speaking with a company that was coming out with an application to improve the efficiency of sales lead generation using social networking. They made a good argument for it, but it seems there's a limit to the amount of productivity that can be gained—calls still take time—unless you're talking about automating the entire process.

Schmidt: The other question has to do with the evolution of sales models. Google has shown that a sales model that uses advertising that's search-based is the first place you should put your sales dollar, because the cost per revenue dollar is so low compared to the revenue dollar delivered, over and over again. That's why our model works so well. In other words, if you're a CEO and you have no sales force, the first thing you'll do is put dollars into Google. And by the way, you'll also put them into our competitors. Same argument. And then you'll say so I want even more revenue than I can get from that, then you would start thinking about a sales force. And that's very interesting because that wasn't true ten years ago.

InformationWeek: That does assume a competent sales campaign behind that.

Schmidt: That's what we do. We have a whole sales force to help people do that. If I were setting up a business today and I did not have a sales force, I would think long and hard. Before I would build a high-cost sales force, I'd build a low-cost distribution channel first, because everybody is under such margin pressure, and then I would figure out how to lay stuff on top of that. And that's new. That is different.

InformationWeek: How does the enterprise business fit into the Google puzzle, and are we going to see continued developments from Google in enterprise IT beyond search?

Schmidt: It turns out that one of the most bizarre things about this business is it's actually growing quite quickly and quite profitable, even after lowering the prices 40%. On a sale-in basis, the business is doing just fine. But that's not why we do it. If you think about it, the person who is ultimately the customer here is inside a company. On a general basis, they're more highly paid than the average customer. They do more searches. They're a better advertising target. It makes perfect sense to me that you should do this even if you were not making money—which is not the case. You would be willing to lose money in this business for the strategic leverage that it gets you to reach those customers. They are the power users.

InformationWeek: You've spoken about price and simplicity being two elements of your strategy --

Schmidt: As opposed to complexity --

InformationWeek: And expense, which sounds more like traditional IT.

Schmidt: Sorry (laughing), I didn't mean to be obnoxious. We're in favor of low prices. We're the deviant one.

InformationWeek: Why is it that the rest of the IT industry hasn't caught on to this?

Schmidt: I think we have some unfair advantages, if you will. We have scale effects. It's very, very difficult to build these things. There are hundreds of technical people who built this. They're just not part of [Google's enterprise group]. [Dave Girouard, general manager of Google's enterprise business] leverages all of that investment—he gets it for free. We don't charge him for all those people. If he were in charge of a startup, how would he get access to that [technology]? He'd have to build all that infrastructure. And even if he could, which would take a long time, he couldn't afford it. We have a cost benefit by virtue of sharing engineering costs essentially. And we also have a brand name advantage.

InformationWeek: Are there any technologies out there in use by competitors, perhaps Autonomy, that propose a different metaphor for search? Something other than keyword search?

Schmidt: I think those are fine. There will be multiple approaches to search. There's no single answer to search. Hopefully, we have the largest footprint, the lowest cost, the most end users. But there're always going to be specialized solutions and we should integrate with them in whatever way makes sense.

InformationWeek: Is Wal-Mart an apt comparison? Is Google the Wal-Mart of the information economy?

Schmidt: Wal-Mart means good and bad things to people.

InformationWeek: It's a loaded question.

Schmidt: Yes. We're certainly the low-cost, high-volume supplier in the distribution market. That allows us to do things the other people can't. So in that sense, I think the analogy is apt.

InformationWeek: It seems that Google is helping to change the adoption pattern for software. There used to be more of a separation between enterprise and consumer software.

Schmidt: It seems to be getting integrated. I agree with that..

InformationWeek: Is there a point at which the mission for Google needs to grow beyond simply finding the world's information? Look at a company like ChoicePoint. They're a search engine, in some sense. Is that a business you...

Schmidt: I disagree with the premise. Look at what people do on the Net today. They search and they communicate. We're in both businesses. Do you do anything besides searching and communicating on the Net?

InformationWeek: No generally, although there are things I'd like to do. I'd like to be able to do analysis better.

Schmidt: What would be an example of analysis?

InformationWeek: Quick correlation of financial figures, for instance. It's something I could do on my own, but it would be very time consuming.

Schmidt: I will admit that is a specialized function. And let's assume for purposes of argument that Google's not going to pursue that. That's fine. That's the third category: specialized. The people who are busy building complicated workflow dynamics in Visual Basic, it's a specialized market. That's not the market that we're in. And there's nothing wrong with that. There's a lot room for that kind of specialization. Let me give you an example. There are legal search engines that understand the law at a semantic level that's required. There are health search engines that do the same thing. That's not something we're going to do. It's too specialized. It's too small a market. It goes back to this Wal-Martization...whatever word you want to use. Wal-Mart is not in charge of every store. But it establishes a baseline by which other stores are judged as specialists. Just to use the analogy further, Wal-Mart has forced other stores to specialize. You either go to Wal-Mart or its ilk, or you go to a specialty store. And each has different functions.

InformationWeek: You talked before about Google's advantage in terms of scale. Do you perceive some sort of advantage you have in terms of your ability to use open source technologies to form what some people describe as an Internet operating system, or to use the Adaptive Path designation, AJAX [Asynchronous JavaScript and XML]?

Schmidt: Which is a very controversial term.

InformationWeek: How do you see that issue?

Schmidt: There are too many visual images tied up in those terms, Internet operating system, everybody thinks we're talking about Netscape, and so forth. I just don't respond to those questions. Those scenarios may or may not occur. What we will say is that we're busy making our products more useful, more extensible, more end-user focused. So the evolution of Gmail, the evolution of search...I think it's up to you and others to speculate about what's going on. That's not how we think. We don't sit there and say, 'Wait! We want to build an Internet operating system! Would you like to join me?' That conversation does not occur.

InformationWeek: As you said during today's Gartner Symposium, five years hence you want to say you'd been able to out innovate people. And I think that people outside the company like to imagine that there's some sort of grand strategic vision that's driving everything.

Schmidt: [laughs] They've obviously not visited Google. We delight in the lack of such strategy. We're very careful to say we're not trying to build one thing. We're trying to innovate in all these interesting spaces. Every innovation is end-user tested and as they become more and more widely adopted, we figure out interesting things to do with them. These teams show off all day when we do product reviews and I say just don't talk to me about long-term strategy. I'm not interested. I want to know why is your product not shipping until next week. And then after this thing is released, tell me what you're going to do about it.

InformationWeek: How do you reconcile Google's mission to make the world's information more available and more accessible with the emerging markets that Google as a global company has to do business in that have a different view what information should be available.

Schmidt: Give me an example.

InformationWeek: China, for example.

Schmidt: Well, you have to abide by the law. We're clearly going to be a significant player in China in some form. And we obviously have to work with the appropriate legal authorities in terms of the law. You can't violate the law. To put it another way, are you proposing an alternative?

InformationWeek: I don't think it's a question that has an easy answer. But obviously when you have internal discussions about 'do no evil' there are some who would argue that censorship is evil. That's one perspective and there are counter-arguments against it.

Schmidt: Well, I will tell you that we have to follow the law in every country we operate in. It is a requirement.

InformationWeek: What about security? Have you been paying as much attention to security as, say Microsoft—you can debate whether or not they've been successful, but they've poured a lot of resources into it.

Schmidt: More people to a bad architecture does not necessarily make a more secure system. Why don't you define security so I can answer your question better?

InformationWeek: I suppose it's an issue of making the technology transparent enough that people can deploy it with confidence.

Schmidt: Transparency is not necessarily the only way you achieve security. For example, part of the encryption algorithms are not typically made available to the open source community, because you don't want people discovering flaws in the encryption. Maybe I should answer a slightly different question by saying that so far this has not been an issue. We have huge teams that work on privacy, security, attacks, index spam, ad spam, all that. You as customer of our blue box here get the benefit of all of that. I don't think it ever goes away. I think you always have that concern. I think Microsoft has learned that the hard way. In many cases, the best way to have security is by simplifying things. Complexity can create security problems because complexity adds paths that you can't model.

InformationWeek: Is there anything you can talk about as part of a broader enterprise strategy?

Schmidt: I'm actually happy with the evolution of this [the Google Search Appliance and the Google Mini]. If you think about it, we brought Dave [Girouard] in a little more than a year ago. The business is growing very quickly. We've added all these new features. It makes sense now to just keep adding more Google to the Google-in-a-box. So a reasonable expectation is that more and more of what's on Google will be available in the blue box. And that'll keep them busy for years. Because when you do that inside of a company, you have a higher level of security and privacy and all that stuff. ... Imagine the evolution of this product line. It gets very interesting. Without pre-announcing anything, it seems like a no-brainer. You have lots of these things sitting around inside all these guys' networks. Just think of the strategic value of that to Google.

InformationWeek: What concerns do you hear most from your enterprise customers?

Schmidt: In my experience, it's always the two hundred different data formats and security and access to that information. The ones I talk to are always saying I have the following weird thirty things. Will you handle them? ...The real barrier to entry is these guys think this [requires] some one-year procurement cycle.

Girouard: We have customer, the National Park Service, and they told this story. The guy said, 'We wanted to put [the Google appliance] on all 36 Web sites of the National Park Service. We created a plan. It was about a two-month plan. The box showed up. We turned it on and the next day it was working with better search that we'd had and we couldn't figure out what to do with the other 58 days.' And that's the kind of thing—people have an expectation that these things are going to be painful. We love that joy, the simplicity when these things just work.

Schmidt: I think people are confused. They don't quite model Google in the enterprise.

InformationWeek: It seems like you're saying Google is contrary to traditional IT.

Schmidt: It's not contrary but it's different. We delight as a company in doing everything differently. ...In his group, we have the wildest meetings, because it's basically all these people who want to change IT.

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