Google tightens its belt

A while back, Google made headlines with some cost-cutting efforts — first eliminating 100 recruiter jobs earlier this year and then cutting contractors and employee perks. While some might think these are signs of desperation, it’s actually just the opposite. Google brought in an experienced CFO Patrick Pichette who has instituted a series of well-thought- out moves to make Google more profitable.

As was noted in a Fortune article “The Axman Comes to Google,” this is a good thing. Pichette hails from Bell Canada, where he eliminated about $2 billion in expenses. As an outsider, he’s not only is not caught up in the usual hype of Web 2.0, he’s from outside Silicon Valley where companies have to actually have revenues that exceed their expenses. Not only has he elminated unnecessary perks, but more importantly he’s implementing business reviews and has eliminated some of the dubious research projects that sounded interesting but weren’t going to actually make any money.

The latter includes the termination of a major effort called Lively, a virtual-environment product that mimicked Second Life, and the shuttering of a failed acquisition, dMarc Broadcasting, through which Google had attempted to broker radio advertising. 

One Pichette fan who appears eager to show his support publicly is CEO Eric Schmidt, who told analyst Mary Meeker at a recent Morgan Stanley investor conference that Pichette is “particularly good at doing business reviews” and that Google is now going through a review process “systematically, business after business.”

No doubt Google employees may miss some of their luxuries, but they should be happy that the management team is thinking wisely how to use its resources. Too many tech companies just can’t say no to yet another blue-sky project that has no hopes of making money. But if you don’t have the discipline to measure ROI and review projects to make sure they are on track, you may as well be in the hit record business and pray you’re lucky.