Google buys messaging security vendor Postini for $625M

It hopes the move will help bolster Google Apps

Now you can add high-tech online security to the list of enterprise-ready features in Google Inc.'s online hosted Google Apps office productivity suite.

In a move designed to make the use of Google Apps more appealing and secure for large business users, the company today announced plans to acquire messaging security and compliance vendor Postini Inc. in a deal worth $625 million.

Mountain View, Calif.-based Google said the move is aimed at helping Google Apps users establish necessary security for a company's e-mail, instant messaging and other Web-based communications. San Carlos, Calif.-based Postini offers services such as message security, archiving, encryption and policy enforcement and has about 10 million users at some 35,000 companies.

Under the deal, which is expected to close by the end of the third quarter of this year, Postini will become a wholly owned subsidiary of Google, according to the two companies.

"The response to Google Apps has been tremendous, with more than 1,000 small businesses signing up for the service every day," Dave Girouard, vice president and general manager of Google's enterprise division, said in a statement. "At the same time, large businesses have been reluctant to move to hosted applications due to issues of security and corporate compliance. By adding Postini products to Google's technology, businesses no longer have to choose -- employees get the intuitive products they want, and the company achieves the security and assurance it needs."

The hosted Google Apps suite offers business users useful applications and tools without having to maintain them on their own. Google Apps, which was launched last August and is now in use by more than 100,000 businesses, includes Gmail, Calendar, Talk, Docs & Spreadsheets and a Personal Start Page.

A fee-based Google Apps offering for large businesses launched earlier this year provides a wider range of services for about $50 per user annually. "With this transaction, we're reinforcing our commitment to delivering compelling hosted applications to businesses of all sizes," Eric Schmidt, CEO and chairman of the board of Google, said in a statement. "With the addition of Postini, our Apps are not just simple and appealing to users -- they can also streamline the complex information security mandates within these organizations."

Dana Gardner, an analyst at Interarbor Solutions LLC in Gilford, N.H., said the Postini acquisition should show large enterprise users that Google is serious about making its Google Apps offering more inviting. "Clearly, Google is on a steady march to making their [Google Apps] offering mission-critical [for large businesses]," Gardner said. "It shows that they're going to take aggressive steps to make their applications ... as carefree for enterprises as they can. I expect that given their resources and track record that they won't stop until they do that."

"It certainly makes sense," Gardner said. "Usually, Google will be in a position to buy or build. By buying [Postini], it shows that they wanted to do this quickly and they felt confident with Postini's technology."

"As the market leader in on-demand secure communications and compliance solutions, Postini complements Google perfectly," Quentin Gallivan, president and CEO of Postini, said in a statement. "We share a commitment to providing enterprise customers with compelling technology alternatives."

Spokesmen for Google and Postini could not be reached for comment this morning.

Under the deal, Google will continue to support Postini customers and invest in Postini products, according to the companies.

Shar VanBoskirk, an analyst with Cambridge, Mass.-based Forrester Research Inc., called the acquisition "a clear move by Google to enhance its existing Google Apps suite" for large enterprise users. But instead of expecting a flood of new large business users right away, this should be seen as a move for the company to get big IT users to take another look at Google Apps, she said.

"It's sort of a beginning," VanBoskirk said. "They're starting the car, but they haven't gotten to the end of the road."

What's still needed, she said, is to show large businesses that future Google Apps paid offerings "can fit with the scale of an enterprise, that they can handle lots of incoming data and be secure, and that they can use it as a replacement for [Microsoft] Word and it will be compatible with documents sent by Microsoft Office users. This alone isn't going to be enough to have the CIO of a $10 million company [switch] over everything for Google Apps."

Copyright © 2007 IDG Communications, Inc.

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