The Impact of Google’s OS to SaaS Applications and Cloud Computing

In the last 24 hours a lot has been written about Google’s announcement to offer a web-based operating system.  While the announcement was short on details, the commentary and speculation more than made up for it.  The majority of the discussion thus far has been centered on the impact to Microsoft’s OS and Office businesses.  This may be well-justified because of the importance of these businesses to Microsoft.  However, Chrome OS will also a big impact to SaaS and cloud computing.

Business users are continuously increasing their use of SaaS and cloud computing.  In addition to the data I receive from our own SaaS portfolio companies and the SaaS companies we consider investing that is providing evidence of increasing usage, a recent survey published by CIOZone showed that over the next two years users are expecting to increase the number (up to 20%+) of workloads they run on cloud-based platforms.  When only new workloads are considered the number of workloads that users would consider running on cloud-based platforms increases even further.  Business and corporate IT users list security, response speed, ease of deployment as the top issues that inhibit the even broader adoption of SaaS applications. Windows at the client side is responsible in part for these three issues. Google’s announcement states the Chrome OS is being built from the ground up on a web-centric architecture to address exactly these three issues.  I’m also certain that the experience Google has gained developing, deploying and supporting its suite of Google Apps (Gmail, Google Docs, Google Calendar, Google Talk) that are now used by over 1.5 million companies will be reflected in Chrome OS.  All this means that Chrome OS has the potential of providing a superior environment for running SaaS applications and deploying cloud-based infrastructures.  Google should be advised to invite SaaS application developers into its development and testing program not only in order to benefit from their experience while building the operating system but also to ensure that enough such applications will be available on Chrome OS from the get-go.

Google’s choice of netbooks as the initial deployment platform for the Chrome OS may also be a particularly appropriate one.  Netbooks are the fastest growing hardware segment in 2008 (growing by 185%), and will represent 15% of all computers sold in 2010.  Microsoft has not been paying as much attention to netbooks because of Vista’s issues and hardware requirements though this may change with Windows 7.  But netbooks are not only popular with consumers.  They are becoming increasingly interesting to corporate IT because when combined with server-side virtualization they represent a key technology that enables CIOs to further cut IT costs and improve their control over the user desktops.  They achieve this because a) they are cheaper devices than the full-fledged PCs, and b) once on a corporate network they can be made to only run the internet- and intranet-based applications approved by the IT organization.  Cheaper desktops implies that hardware upgrade cycles can be expedited and more money can be freed for other IT initiatives, such as the purchase of additional applications.  Many netbooks run on Linux today.  While Chrome OS will also be based on Linux, it has the opportunity to be better tailored to netbooks than “raw Linux” (since it is being architected from the ground up with such devices in mind). So, Chrome OS will not only provide a more controllable environment but one that runs SaaS applications faster and more securely.  Having less expensive desktops, exerting better control over these desktops, and knowing that these desktops are less vulnerable to security problems and run web applications better will make IT further accelerate the deployment of SaaS applications.

Within a day Chrome OS has succeeded in capturing peoples’ imagination about the computing opportunities it will enable.  Let’s hope that it will be delivered on time and that it will be robust enough for CIOs to feel comfortable using it effectively in their corporate environments.  Then I expect to see the beginning of an even stronger cycle of SaaS and cloud computing innovation.