How is Google dealing with that challenge?

Our group's job is to learn from the consumer space and apply it to the enterprise. It's a myth that the enterprise user is fundamentally different than the consumer. All users are just people. Users that [deploy] our consumer products are the same as the IT people we're talking about. They don't walk through a phone booth and put on an enterprise user cape when they go into work every morning. From an end user point of view, you'll see 90 per cent consistency between the enterprise and consumer versions of out applications -- and that's [done] on purpose. We learn a lot from consumers, and try to drive that ease of use and simplicity. The enterprise dimension comes into play around administration controls. It's making our applications organizationally aware. We can make sharing among your company very easy and straightforward. We can put protections that ensure you don't share things outside. And there are APIs to integrate with directory systems.

How does Web 2.0 and social networking affect hosted apps?

Social networking is really going to find its home in the enterprise. That's not to disparage Facebook or MySpace or our own social network. But when you think about work and business, it's all about the network. It's about who you know and who you're connected to. The existence of a social network and the leveraging of that network is really key as cloud applications continue to evolve.

What is Google's social networking strategy?

Our open social initiatives are really about tapping into the social graph. For us, the first very simple incarnation of social networks is embedding presence in more and more places like calendars, spreadsheets, and applications. The cloud facilitates that capability. As you move out of disconnected world into [a connected] cloud-based world, we can build our apps from the ground up to be inherently social or inherently collaborative.

Are there plans for Google Apps to take on the products of top applications vendors like Oracle Corp. and SAP AG?

I would never say never but I don't see us having a core competency in enterprise resource planning financials, or CRM. I don't see us necessarily heading in that direction.

Are you concerned that Microsoft has put Google Apps directly in its crosshairs with a new hosted offering?

I don't wake up every day thinking: 'how am I going to beat Microsoft.' Obviously Microsoft is a competitor and they are the dominant player in the office productivity space. We do see them in the market -- saying we didn't would be disingenuous. But we don't make that our focus. It's a really big playing field, there's room for lots of people -- Google, Microsoft, IBM, startups.

Is Google better suited to host business apps than companies like Microsoft?

The advantage we have is no legacy. We weren't trying to take Exchange and host it or to take Sharepoint and host it. That's probably one of the biggest challenges for Microsoft and other vendors. They've got 30 years of a traditional way of doing things. It's very hard to step outside of that and start from scratch.

What pricing model do you think will be used by SaaS vendors in the long run?

I think we're going to move toward a true utility model. You only pay for the power that you use. Yes there may be some connection charge you pay every month to keep the lights on, but you only pay for what you use. And I think software as a service cloud computing applications give us that capability. I see no reason why should you even pay for all users -- you should really pay for active users.