Zoho's CEO Answers The Question, "Why compete with Google?"

Sridhar Vembu, CEO of Zoho, has posted a fascinating insight into the perceived strategy of Google that includes some astounding financial facts such as:

Google makes nearly as much in profit per employee as SAP or Oracle Salesforce make in revenue per employee

He concludes his thinking with:

It is fairly obvious they [Google] are in it to put Microsoft on the defensive on its home turf, so that Microsoft’s offensive capability in the internet is diminished. It is also perfectly clear why Microsoft wants to be an internet player - as Google has shown, it is a higher margin business even than its monopoly-profit core business.

I suspect there are two other reasons
Firstly, Google is a business like any other and has the same computing needs as all companies (word processing, sharing information yada yada yada) and there was NO WAY they were going to let a ("the") major competitor be the vendor for the IT solutions. And so they bought/built their own. Once they were stable enough why not use them as a weapon as outlined above.

The second reason is hinted at in Google Blogscoped's, Why Google Buys Companies:

Data. Like articles, meta data, digital archives, photographs.

As we know, Google's stated aim is "to organize the world's information and make it universally accessible and useful." This statement does not limit itself to "only websites" ... it's the "world's information". The vast majority of the "world's information" is not packaged up all neatly onto a publically facing website - it's held in Word documents, emails and PC C: drives. How was Google to get access to this information - by providing the tools for us to move our use into the Web and let Google get at it.

Oh, and as a response to Sridhar's post the C|Net News writer Dan Farber has posted Zoho's last stand which is, again, a great read with the takeaway point for me being:

If Google can attract consumers with its apps, gaining entry into small- and medium-size business won't be a huge profit-sucking sinkhole of sales and marketing. The search giant claims that more than 500,000 businesses and schools have signed up for the free and $50 per-user-per-year Google Apps. According to Dave Girouard, head of Google's enterprise division, the Google suite has about 10 million active users. Google can afford to invest in building the the market for Google Apps, and Microsoft will be forced to alter the economics of its Office business as cheap and capable cloud-based suites, with offline capabilities, gain traction.