How's Google doing in the corporate world? Talk to Chuck

A woman uses the Chromebook from Google
Source: Google

Google became the most valuable internet brand through its ubiquitous search engine and smartphone software. Finding comparable success within the corporate walls has been a challenge.

The company's web-based applications for creating documents and spreadsheets are popular among small businesses, but less so within large enterprises. And Google got a late start in the cloud infrastructure market, where Amazon Web Services has built a wide lead with companies looking to offload their data storage and computing needs to outside data centers.

Google's quest to crack the enterprise market is now getting a major lift from an unexpected source: laptops.

Built on its homegrown operating system, Google's Chromebooks outsold Apple Macs in the first quarter and are gaining the trust of some big-spending clients. For evidence, talk to Chuck.

Charles Schwab, the 45-year-old financial services company, has been replacing paper forms at roughly 250 branches and loading up on Chromebooks. Through a secure digital session, customers can open an account, add a family member or sign up to the firm's automated investing service. All that data is automatically wiped off the computer after the client logs off.

Schwab started with a rollout of about 1,000 Chromebooks early last year and has since doubled that number, said Ed Obuchowski, Schwab's senior vice president of advisor technology solutions.

This is just the start. Over time, Obuchowski says, the Google brand is quite likely to show up in a variety of other places inside Schwab.

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"Google has a relatively compelling offer in a number of different areas," said Obuchowski, who is based in Phoenix, though the company is headquartered in San Francisco. Along with devices and apps, "their cloud platforms are pretty intriguing," he said.

Heading into Google parent Alphabet's second-quarter earnings report on Thursday, investors are looking for evidence of revenue diversification. Online advertising accounted for 90 percent of Alphabet's $75 billion in sales last year, even with a $10 billion capital expenditure budget focused largely on building out data centers.

Analysts are projecting revenue growth of 17 percent in the quarter to $20.8 billion from $17.3 billion a year ago, according to a survey by Thomson Reuters. Adjusted earnings per share in the period ended June 30 likely increased to $8.04 from $6.99.

Alphabet shares have jumped 16 percent this year, closing on Tuesday at $757.65.

The focus remains on advertising and how efficiently Google can generate revenue from smartphones, where behavior is very different from traditional desktop search. While Google remains the dominant player in digital advertising, Facebook has shifted to smartphone ads more rapidly, and there's the perpetual risk that search will lose relevance as mobile apps get smarter.

Last year, Google's founders changed the company's structure, creating Alphabet as a holding company of sorts. Core Google is where all the money is made, and a separate category called "Other Bets" includes projects like Google Fiber, Nest thermostats, science initiatives Calico and Verily and the investment arm Google Ventures.

Android phones and Chromebooks are part of Google's main business, and beyond that the company says little about how well they're selling. Gartner predicted last year that sales of Chromebooks in 2016 would increase 9.1 percent to 8 million units, following a 27 percent jump in 2015. Worldwide PC shipments, meanwhile, are falling, with a 5.2 percent drop in the second quarter to 64.3 million units, according to Gartner.

Like with Android phones, Google supplies the operating systems for Chromebooks and counts on manufacturers for the hardware. Schwab, for example, went with a computer from Samsung, though Dell and HP are among other suppliers.

Google makes money by selling device management for $50 a year per computer. Google's technology runs behind the scenes, quickly and securely pushing data to the cloud to avoid having information stored on the machine. And earlier this year, Google turned on Android apps for Chromebooks, making it easier to use productivity software from vendors like Microsoft, Evernote and Dropbox on the devices.

Charles Schwab
Scott Eells | Bloomberg | Getty Images

Education accounted for 72 percent of Chromebook sales in 2014, according to Gartner, but Google is rapidly pushing into numerous types of businesses.

In addition to Schwab, retail chain Woolworths replaced 8,000 Windows-based machines with Chromebooks in its stores, said Rajen Sheth, a director of product management in the Chrome and Android unit. Netflix uses the computers in its call center, and Fifth Manhattan, a payments services provider, utilizes Chromebooks for remote employees.

"We're just seeing the beginning of this with Chromebooks in the enterprise," Sheth said. "A lot will happen in the next couple years to make this even bigger."

Schwab already has multiple Chromebooks in every branch and is now looking for other areas to employ Google's enterprise products.

For one, the company is considering the Chromebox, a Chrome-powered computer, that could sit in branch lobbies. Currently, Schwab has close to 1,000 Windows-powered machines for that purpose, but Obuchowski said Chrome devices are faster and "a lot easier to manage."

Schwab is testing other Google technologies that Obuchowski couldn't discuss. Broadly, he said the company is looking at cloud, storage and collaboration solutions.

Google has ramped up its enterprise investment since bringing in VMware co-founder Diane Greene to run the cloud business in November. Greene's primary push is to get large companies with heavy and complex workloads to send that computing over to Google, which has both the server capacity to handle it and the big data tools and software to help gather insights.

With only 4 percent of the cloud infrastructure market, Google is chasing down AWS, which commands 31 percent of the market, followed by Microsoft at 9 percent, according to Synergy Research Group.

Greene also oversees Google for Work, a suite of web-based products including word processing, spreadsheets and presentation software.

Obuchowski said that while Schwab has had discussions with Google about its cloud apps, pulling business people away from Microsoft Word, Excel and PowerPoint is more difficult than buying a bunch of Chromebooks.

"The challenge is in a firm like Schwab, we've been around a long time and we all grew up on Microsoft," Obuchowski said. "It's less of a technology transition and more of a cultural transition."