By Sterling “Chip” Camden
Contributing Writer, [GAS]

Is it perhaps the worst sign yet of how badly the economy is in trouble?  Is it an indicator that Google’s business model is finally reaching the end of its long rope?  Or both?

Everybody’s been trying to cut costs lately, but the last company you expected to hear it from was Google — right?  Well, maybe not.  For years now, the Gorilla of search has been living with its own 800-pound gorilla:  they’ve realized that Google cannot continue its amazing growth on ad revenues alone, but they haven’t managed to invent another revenue stream that’s amounted to more than a trickle by comparison.  Although their overall revenue continues to grow, that growth was much slower over the past year.  Between that and premonitions of worse to come in the global economy, Google has decided to do a little belt-tightening.

We don’t use the word “layoffs” — no, rather than firing permanent employees, Google is cutting its contract labor by not renewing contracts.  But Google employs quite a few contractors — around 10,000 compared to about 20,000 permanent employees around the world.  So Google could reduce its workforce by one third without eliminating a single permanent position.

Some of those contract positions service the many perks that have made employment at Google the envy and desire of technocrats everywhere.  Some of those perks will be disappearing as well.

And remember their policy of 20% time, in which engineers were encouraged to devote 20% of their time to whatever they wanted to work on?  That won’t be eliminated (yet), but special projects will have a much harder time getting funding and personnel to see them through.

Services that have already been deployed but didn’t make their expected big splash will be shut down.  Lively, SearchMash, and Page Creator (I never saw the sense in that one anyway) are already on the chopping block — with more to follow.  Gee, I hope  they don’t axe GMail.

Google’s amazing success over the last ten years has drawn innumerable imitators.  PHB’s everywhere tried to be clueful and encourage innovation by offering employees free food, flexible hours and improved working conditions (can you say, “dual monitors”?).  Some even implemented their own versions of the famous 20% time (though more often it was like 5% — and after 6PM).  With Google cutting back in these areas, expect a lot of “I knew it wouldn’t work” (even though they were evangelists at the time) and “if Google’s tightening up, we’d better follow in trumps.”  Now is not a good time to ask your employer for a better grade of coffee — they just might take your cup away to collect spare change.

I have just recorded a screencast version of my php|works/PyWorks 2008 opening keynote: Beyond the Source: Growing Your Community. They gave me the option to talk about anything I wanted to, and so I decided to do a talk on marketing of open source projects.