SAP and Microsoft, Watch Your Back

Google Apps, Linux, and other free or inexpensive systems are winning more fans in the corporate world

The outlook for retailing may be dicey, but Gothic Cabinet Craft, a furniture chain with 40 stores in New York and New Jersey, has one variable under tight control: tech spending. It just installed a new computer system equipped with Google (GOOG) Apps, a collection of software, including e-mail and word processing, that runs on a Google data center rather than on Gothic's gear. The cost: just $32,000 for the new PCs and zero for Google Apps. The alternative was shelling out more than $100,000 for computers and Microsoft (MSFT) software. "We wouldn't have been able to do anything if the Google service wasn't available," says Aristidis Zaharopoulos, the company's vice-president.

The chain is among the more than 1 million companies using Google Apps. Large companies are on board, too, including Genentech (DNA), with 17,000 employees. Many customers pay nothing, while others spend $50 a year per user for advanced features.

As the U.S. enters what appears likely to be a painful recession, a major shift is taking place in how businesses assess technology products. They're under terrific pressure to cut costs. According to a newly revised forecast from market researcher IDC, growth in U.S. tech spending will decline to 0.9% in 2009, down from a previous forecast of 4.9% growth. But rather than just slice budgets across the board, many companies are switching to a handful of new technologies that save them money.

These technologies existed during the last recession, but they were immature. Now they're established, and the downturn seems likely to hasten their adoption. Chief among them are software delivered over the Internet, known as cloud computing, such as Google Apps; so-called virtualization software, which allows companies to run multiple applications on a single server computer; and open-source software, which is created collaboratively by multiple companies and is typically less expensive than the traditional kind. "These are tools that management can use to get through a crisis," says Michael Hickey, president of the Business Insight Div. of Pitney Bowes in Stamford, Conn., who just bought software from on-demand supplier Salesforce.com.

More here...