Well, you don't have to be paranoid -- paranoia is a choice.
I'm paranoid about a lot of things, but Google having my contacts isn't one of them. In the modern era you have to trust someone, usually many someones. Any of them can make a mistake, but that doesn't mean the trust was misplaced. It just means you need to take informed risks, and do a few things to protect yourself if the worst happens. I don't trust Facebook at all, for example, so I behave very differently with stuff I put on that service compared to Google.
Do the you think people weren't paranoid enough when they shopped at Target, only later to realize that 10's of millions of their accounts and personal identifying info had been plundered by hackers for well over a year, due to the incompetence and oblivious IT management of the Target staff? From a 30-year IT guy, my advice is worry a lot more about that kind of risk from seemingly normal day-to-day stuff, and don't be as concerned about whether Google may or may not do something with your contacts. Google data mines the entire Internet already anyway, so they've got you if they want you. Plus if you use Gmail, Google already has all those contacts and email contents, so again if they want you, they've got you.
Personally I worry more about Microsoft. For that reason I can't comment from experience about syncing Outlook & Gmail contacts because I have never used and will never use Outlook. If there was a single app that was a bigger virus incubator on the planet than Outlook, historically speaking, it would be hard to imagine what it was. Well -- perhaps Internet Explorer, another Microsoft product. The number of instances of compromised systems and data involving Google I suspect will never begin to approach the sheer volume and severity of issues triggered through Microsoft security flaws. That's a much more real danger, IMO, than worrying about what Google might do with your data (much of which they already have).
I've been running on Gmail and Google Docs for business for a long time, and so far have no reason to regret the decision. Just checking around for ideas on syncing contacts, using Google itself of course
, I found this manual procedure published by Microsoft.
http://office.microsoft.com/en-ca/outlo ... 22048.aspx
Then I found there's this sync tool from Google itself, which appears to support automatic bi-directional sync of email, contacts, calendar, etc. between Google's services and Outlook.
https://tools.google.com/dlpage/gappssync
If it works, I wouldn't see a concern about using it given that you're already using both Outlook and Gmail. It would eliminate the need to look for a third-party tool like the open source "go contact sync mod" utility referred to above...