Why did Google acquire Postini?

The acquisition last month of Postini by Google for US$625 million (AU$765.77 million) was not a major surprise given that the companies have had a working relationship for the past several months for the former to provide the latter with security services.

So why did Google acquire Postini? The more obvious reason is that Google wants to bolster its Apps offering so that it can compete more effectively with Microsoft Office and migrate users of the latter to the online/offline Google offering, particularly in the enterprise space. Postini could certainly help Google to do that by providing robust security, archiving and other capabilities, as well as by delivering a large number of potential customers for Google Apps.

However, the problem with a direct frontal assault on Office is that Google would face a fierce competitive response from Microsoft given that Office has 90+% market share in the desktop productivity application space and has enormous resources at its disposal. Plus, Microsoft's announcements provide further direction on the company's plans to compete in the Google Apps space.

Another reason for the acquisition may be that Google is positioning itself for a major push in the enterprise messaging space. Not that the company doesn't already have a strong offering in GMail, but it's more focused on the consumer space and less on the enterprise space than perhaps Google would like. My belief is that Google will acquire a messaging company during the next six months and use that company plus Postini to create a very robust enterprise messaging offering. I have an idea as to which company Google will acquire, but won't share it here since it's pure speculation at this point.

I believe that becoming a major player in the enterprise messaging space first will make it more likely for Google to be successful with its Apps offering in the long run than if the company goes head-to-head against Office without a strong messaging presence in the enterprise. I have two reasons for believing that: first, while Exchange is the leading enterprise messaging offering today, it has a much smaller proportion of the installed base than does Office and so the market will be easier to penetrate. Second, if Google is successful at integrating a variety of Web services into its messaging offering, the migration to Google Apps could be easier.

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