Google is betting that the Enterprise will spend more money on SaaS than they will on PaaS. As Gartner said,
“Ease of use, rapid deployment, limited upfront investment in capital and staffing, plus a reduction in software management responsibility all make SaaS a desirable alternative to many on-premises solutions, and they will continue to act as drivers of growth.”
Google has made a bet that they can lure start up companies and next generation developers to their platform by choosing a dynamic language that facilitates mash-ups. And by doing this they will be the preferred platform for many next generation SaaS companies. But which ones?
The Google platform doesn't really offer any 'enterprise grade' functions. What it does offer is simple access to the Google world of social networking, ads, etc. In its current form the platform is best suited as a platform to enable SaaS for large audience applications (like social networking).
PaaS providers are still trying to figure out their target markets. Companies like Coghead are chasing the SMB market, hoping to attract customers who want to avoid setting up their own hardware and paying expensive programmers. SalesForce is clearly going after the enterprise ISV's. We're quickly getting to the point where each of these players will have to announce their target market to the world. The 'one size fits all' model won't last.