Google to Rein In Free Version of Software

The Wall Street Journal 

• TECHNOLOGY

• Updated December 6, 2012, 7:29 p.m. ET

By AMIR EFRATI

Google Inc. said it stopped offering its suite of Web-based software for businesses—known as Google Apps—free of charge to groups of 10 or fewer users, as it moves to generate revenue from previously free services.

The move shows a renewed focus by Google on serving small businesses, which have long been the sweet spot for Google Apps. The Web-based software competes with Microsoft Corp.'s MSFT -0.94% Office software and Exchange email service.

Sundar Pichai, Google's senior vice president in charge of Google Apps, said Google wants to provide small businesses that use the free version of the software with dedicated customer support—something only paying customers currently get. "We're not serving them well," he said of the free users.

Related

Google Wins U.S. Contract

Google Targets Amazon Again, With Cloud Service

GM Signs Google Apps Pact, in Initial Step Toward Cloud

Google Tool to Move Microsoft Files to Web

Microsoft, Google Vie to Sell U.S. Cloud Mail

Mr. Pichai added that the millions of people who already use the free version will continue to get it free.

Google Apps, part of a technology trend known as cloud computing, includes a custom email address, Google Docs and Google Drive online storage as well as customer support for paying customers.

For the past year, any business with more than 10 software users paid $50 per person a year for the service. Before 2011, only companies with more than 50 users were required to pay.

Over the past year Google generated around $1 billion from the sale of Google Apps and separate mapping software to businesses and governments, said people familiar with the matter. Google said more than five million businesses use Google Apps, though the vast majority have fewer than 10 users and thus use the free version. In total, Google has said more than 40 million people use the free and paid versions of Google Apps.

Paul Davison, co-founder of a popular mobile app called Highlight that launched this year, said he and his six colleagues have been using the free version of Google Apps for email, calendars, storage and to collaborate on documents and spreadsheets. "We would definitely be willing to pay," he said.

Google has made other moves to generate revenue from businesses that used its services for free. Last year, Google began charging businesses such as mobile app makers that access Google Maps more than 25,000 times per day. This year, Google began charging retailers seeking to be included in its Google Shopping service.

Dave Girouard, who ran the Google Apps unit before leaving Google earlier this year, said Google's recent moves to charge a fee to more business customers were partly influenced by Apple Inc.'s business model for its services, such as iCloud online software.

Apple "doesn't give anything away for free, and that's had some influence on how Google thinks about enterprise," said Mr. Girouard, who now runs Upstart Network Inc., which helps college graduates raise money to launch businesses.

Since it began selling Google Apps in 2007, Google has had occasional success at signing up big companies such as Spanish bank Banco Bilbao Vizcaya Argentaria SA BBVA.MC +0.71% and government agencies such as the U.S. Interior Department. Google Apps late last year signed a deal with General Motors Co. GM -2.25% to provide email and online-collaboration software to more than 100,000 employees, but the deal later fell apart, said people familiar with the matter.

In recent years, Google has pushed further into selling software services to businesses, surprising Web-industry observers who expected Google Chief Executive Larry Page to scale back the efforts after taking the job in early 2011. Most recently, Google launched the Google Compute Engine, allowing companies to run their applications and store data on computers managed by the Internet giant.