The evolution of the Google Cloud into a compelling option for enterprise IT buyers is an ongoing, multi-year process that has so far involved senior management changes, the rejigging of business units and several product rebrands.
On the back of all this chopping and changing, the Google Cloud Platform – and how it differs from what its major competitors have to offer – has become far more tangible and defined. And the firm is reaping the rewards in market share and revenue growth.
“Google has done well, increasing its worldwide market share from less than 6% five years ago to 10% today,” John Dinsdale, chief analyst and research director at market watcher Synergy Research Group, told Computer Weekly. “Over that same period, the market size has grown five-fold, so Google has been able to grow its share of a market that is itself growing extremely rapidly.”
Even so, as Dinsdale concedes, Google Cloud remains a “distant third” in the public cloud market rankings behind Microsoft Azure and Amazon Web Services (AWS).
Undeterred, it has sought to differentiate itself from Microsoft and Amazon by talking up its technology credentials – specifically its portfolio of artificial intelligence (AI), machine learning and data analytics services – rather than pitching itself as just another purveyor of cheap commodity cloud compute and storage services.
The firm’s commitment to ensuring that its cloud services are built on open source principles is another feature that it emphasises as a point of competitive difference. This has also fed into the marketing of the Google Cloud Platform as an enabler for enterprises to adopt a multicloud strategy.
On that point, it remains difficult to say with any degree of certainty how many Google Cloud users are “all-in” on its platform, rather than using it to supplement the cloud deployments they already have in place with the likes of Amazon and Microsoft, said Sid Nag, vice-president of cloud services and technologies at market watcher Gartner Research.
“The market share numbers speak for themselves,” he said, citing Gartner’s most recent Worldwide public cloud services market share data from June 2022.
Its data has Google pegged as the fourth-biggest public cloud provider globally, behind Chinese firm Alibaba. AWS leads the market with a 38.9% share and whole-year revenue of $35.4bn for 2021, while Google’s share stands at just over 7%, with the firm making $6.4bn in revenue last year.
“Does Google have customers that use them as the primary?” said Nag. “Of course they do, but the question is what percentage of customers are using Google as a primary provider, rather than the secondary? Or tertiary in a multicloud construct. That’s really the issue.”
Google Cloud customer acquisition spree
The last couple of years have seen the firm’s sustainability credentials also lauded as a reason to “go Google” by customers, including fashion house Stella McCartney and consumer goods giant Unilever, which are using the platform to make their supply chains greener.
The Google Cloud Next user conference in October 2022 saw the likes of car marker Ford also speak at length about how it is using the firm’s technologies to improve the efficiency of its manufacturing processes and to enhance the driving experience for its customers.
Telco giant Vodafone signed a six-year deal with Google Cloud in May 2021 to extend an earlier collaboration between the two firms that was focused on bolstering its data processing capabilities.
During Google Cloud Next, details emerged about how the next phase of this partnership will see Vodafone embark on a multi-year effort to migrate all of its on-premise SAP workloads to the Google Cloud platform.
Also announced at the show was the news that online furniture retailer Wayfair had completed an “all-in” move to Google Cloud, which saw it move all the workloads and applications in its datacentres to the platform over the course of 16 months.
Building its customer acquisition strategy on the pillars of AI, open source and sustainability is why Google Cloud’s most recent set of financial results confirm that its revenue grew by 35% year on year to $6.3bn during the second quarter of 2022.
But the company has so far failed to turn a profit. In fact, its Q2 results revealed that its losses have widened year on year from $591m in 2021 to $858m in 2022.
According to Nag, this might be a sticking point for enterprise IT buyers who are still weighing up whether to add Google to their roster of IT suppliers.
“[Google Cloud] continues to grow as a business within Alphabet, but the biggest challenge is they haven’t shown operating profitability for a very long time,” he said. “Google Cloud launched in 2008, and now it’s 2022…and they haven’t shown an operating profit in all that time.
“The company keeps saying it’s focused on growth. That’s fine, but obviously, as you get considered by enterprise buyers, financial viability is important. The company may claim financial viability is not an issue, because it is part of a parent company, Alphabet, which is highly profitable and highly viable.”
The parent trap
The Google Cloud Platform’s connection to Alphabet is a positive one in terms of giving it the breathing space it needs to pursue a growth strategy as its losses widen.
And during the conference call to discuss its Q2 results, Alphabet chief financial officer Ruth Porat shed some light on why turning a profit continues to elude Google Cloud because of how heavily it is investing in its platform.
“Customers are transforming their businesses, utilising Google Cloud Platform’s secure infrastructure with data analytics and AI capabilities, uncovering real-time insights and leveraging the collaborative tools of Workspace [formerly known as G-Suite],” said Porat.
“They are in the early days of this transformation, and we continue to invest in our products, our go-to-market capabilities and cloud regions.”
Indeed, Google Cloud Next saw the firm set out plans to open its first datacentre regions in Austria, Greece, Norway, South Africa and Sweden, having already publicly committed earlier this year to building out its datacentre presence in Malaysia, Mexico, New Zealand and Thailand in response to the growing demand for its services.
This means Google Cloud now has a total of 48 regions that are either live or under development.
There is also a persistent question about whether Google Cloud’s close ties to its parent company remains a sticking point for some enterprises, because Alphabet’s highest-profile offerings are consumer-grade products such as YouTube, Google Maps and its flagship search offering.
Synergy Research’s Dinsdale said: “While Google is a very strong brand that plays well all around the globe, historically this was more of a strength in consumer rather than enterprise markets. In many senses, Google’s history was supplying free services on a best-efforts basis.
“That might be fine for people who are doing searches or trying to find their way from A to B, but for enterprise customers, best efforts is nowhere near good enough.”
Also, Google entered the cloud market only two years after its arch-rival AWS pitched up, but its early offerings were not, said Dinsdale, “as focused and aggressive as they should have been”.
John Dinsdale, Synergy Research Group
He added: “By then, Amazon was already well established and it has continued to benefit from its early mover status, keeping the pedal to the metal by aggressively expanding its range of cloud services, constantly growing its worldwide datacentre footprint and growing its sales and support capabilities.”
The origin stories of both AWS and Google Cloud share a degree of commonality, given that both were effectively spun out or built using knowledge gleaned internally from operating a consumer platform. In AWS’s case, that’s the Amazon retail business.
“Given the nature of cloud services and Google’s existing technology foundation, this was a market that should have been a natural target and one in which it could have been a leader,” said Dinsdale. “Instead, it missed the boat and has constantly been playing catchup.”
But while Google’s reputation as a purveyor of consumer-grade cloud services may have initially held it back in the enterprise, the CEO of parent company Alphabet, Sundar Pichai, used the opening keynote of Google Cloud Next to outline how its consumer business helps strengthen its enterprise offerings.
“We developed our global network, including 22 subsea cables, to bolster our infrastructure and improve the performance of our products like YouTube,” he said. “Now it’s available to our customers as well.
“We developed BigQuery to help our search customers. And now every company has access to the most powerful analytics. And because we invested for years and threat analysis to protect everyone who uses Google, we can help provide that same protection to countries and companies with Google Cloud.”
And it is this part of the Google Cloud proposition for enterprises that Nag said is landing well with IT buyers.
“Google has never had a problem with technology, right?” he said. “They’ve always been at the forefront of cutting-edge technology and they do a good job of cross-pollinating that across the different properties and assets, be it YouTube or Search or Maps or whatever, and into their cloud offerings. That’s always been covered.”
This view is shared by Simon Dawson, a member of the C2C Google Cloud Customer Community and head of engineering at Atom Bank.
“Google has developed a strong brand and reputation for running public cloud services that are consumed by millions of users worldwide,” he said. “Enterprises can see the reach and scale of services such as Search, YouTube, Maps, and so, and be confident that Google Cloud’s underlying infrastructure that powers these services can be leveraged for their own business needs.
“Google’s public cloud proposition provides global reach, scalability, advanced security and resilience out of the box. These strengths, coupled with their continued investment in service offerings, particularly in the AI and machine learning space, can provide a competitive advantage for enterprises looking to scale their business.”
Google Cloud: An AI-first company
The Google Cloud Next keynote also saw Pichai talk about how Google has “long been an AI-first company” and how this has contributed towards it making great strides in “challenging areas” such as translation, computer vision and natural language processing.
“These advances are powering helpful product innovations, from enabling people to search using video and text simultaneously, to summarising long documents and highlighting what matters,” he said.
“Google is also applying cloud AI tools to help solve our own business challenges. Google’s products are used by people around the world who speak thousands of different dialects and languages. It’s really important we can provide translations, so everyone can access them.”
Pichai also gave an example of some technology that is in the pipeline from Google Cloud, which is geared towards making online meetings a more personable experience using 3D modelling technology, which is being developed under the name of Project Starlight.
“It creates a 3D model of a person, making it feel like you’re sitting with someone in the same room – not at the other end of a video call,” he said, adding that the technology has been put through thousands of hours of testing internally at Google.
“Users noted the powerful ability to make eye contact and how much more engaged and connected they felt,” said Pichai.
As confirmed at Google Cloud Next, the technology is now being tested with a series of third-party Google partners, including Salesforce and T-Mobile.
“Starting this year, we will begin installing Starlight prototypes in select partner offices for daily testing,” said Pichai. “It’s a really exciting next step and we are looking forward to improving this technology together.”
Post-pandemic, initiatives like Project Starlight are sure to be of interest to enterprises that are grappling with how to make a go of operating a hybrid working setup, but another notable announcement the firm made at Google Cloud Next was around the sovereign cloud strategy it is pursuing.
Read more about Google Cloud
- The unveiling of Google Cloud’s Anthos multicloud management tool dominated many discussions at the firm’s annual developer conference in San Francisco, amid claims that it could change the face of enterprise IT for decades.
- Google and OVHcloud are embarking on a technology tie-up that will see the two firms bring a hosted private cloud service to market in Europe.
It was in September 2021 that the company first outlined its commitment to providing private and public sector organisations across Europe with access to off-premise services specifically designed to meet their security, privacy and digital sovereignty requirements.
It would achieve this by partnering with local cloud providers in several European countries, including T-Systems in Germany, S3NS in France, Minsait in Spain and Telecom Italia in Italy, to bring to market sovereign cloud services.
And according to Nag, the strategy it is employing to deliver its sovereign cloud services is a blueprint it should follow to add more meat to the bones of its multicloud proposition for enterprises.
“Google Cloud talk about multicloud and have always taken the approach of being a multicloud provider in a very open manner, but they have not really done anything to demonstrate a multicloud narrative for enterprises,” he said.
“They haven’t formulated strategic partnerships with other players in that space in the way that, for example, Oracle and Microsoft have.”
Nag added: “On the multicloud front, they should definitely formulate some partnerships to demonstrate their commitment to that.”
The firm has a multicloud-enabling platform called Anthos, which it claims can help enterprises containerise their applications so they can run in the Amazon and Microsoft public cloud, as well as in on-premise datacentre environments, with minimal modifications.
“Anthos is a piece of software that supports multicloud and containerisation and all that, but in essence, they are still pushing their own technology via the multicloud narrative in many ways and it is also unclear how much traction they are getting with Anthos because they don’t really publish that data,” said Nag.
Another challenge the company is facing is in building out its channel strategy, which Nag described as “lagging behind” and “evolving”, but will – in time – provide another route into the enterprise for the company.
Synergy Research Group's Dinsdale backed this view, saying: “It took too long for Google to get really serious about sales, support, channels and marketing for enterprise markets. Google has come a long way in the last five years and it is pushing all the right buttons. The challenge remains that Amazon and Microsoft are also pushing those same buttons.”