Google to outline what’s next for its cloud biz
By Edwin Yapp March 9, 2017
- Conference dedicated to cloud begins; what surprises in store?
- Can Google shed its geekiness and speak enterprise?
ONCE again, I find myself at another cloud conference, off the back of the last I covered in November 2016, courtesy of Amazon Web Services (AWS). This week, its Google’s second iteration of its cloud conference dubbed Google Cloud Next 17.
Cloud computing is the new normal these days and not surprisingly, both vendor camps – born-in-the cloud players such as AWS, Google Inc, Salesforce.com et al and old school players like Microsoft Corp, Oracle Corp and SAP SE – are vying for market share and column space in the media.
According to Synergy Research Group, public cloud computing as a whole is growing. The US-based research firm estimates that quarterly public cloud infrastructure service revenues have now reached well over US$7 billion and is expected to continue to grow at almost 50% per year.
Public cloud providers are defined as service providers who lease out their computing, networking and storage services over the Internet to customers who do not own or do not wish to operate their own data centres. These players are also known in industry parlance as public infrastructure-as-a-service (IaaS) providers.
Synergy Research Group chief analyst John Dinsdale said new data shows that of the major players in the market, AWS is maintaining its dominant share of the burgeoning public cloud services market at over 40%, while the three main chasing cloud providers – Microsoft, Google and IBM – are gaining ground but at the expense of smaller players in the market.
Dinsdale said AWS has no intention of letting its crown slip and added that there are good reasons why AWS is staying at the forefront of the market. Noting that achieving and maintaining a leadership position in this market takes a number of factors, he claimed that serious challengers need to follow the AWS example.
“It takes takes huge ongoing investments in infrastructure, a continued expansion in the range of cloud services offered, strong credibility with the large enterprise sector, consistently strong execution, and the wholehearted and long-term backing of senior management.
“AWS is checking all of those boxes and any serious challengers need to do likewise,” he argued.
Similar trends were observed by another analyst firm Gartner. Although the spotlight was on AWS’ leadership, what’s poignant to note was that Microsoft and Google are both catching up in the scale-out, public cloud IaaS game.
The Redmond, Washington software giant has been on a resurgence path. Driven primarily by the vision and execution of its chief executive officer (CEO) Satya Nadella, Microsoft has been putting considerable resources behind its cloud offering dubbed Microsoft Azure, and as a result has seen some significant growth recently.
It’s latest Q2 earnings report, Microsoft ‘Intelligent Cloud’ – comprising both Azure cloud platform and server software – business recorded US$6.9 billion and increased 8%. The company’s server products and cloud services revenue increased 12% driven by double-digit annuity revenue growth, while its Azure revenue increased 93% with Azure compute usage more than doubling year-over-year.
Meanwhile, Google, which doesn’t break out its cloud specific revenue, noted that it “is on a terrific upswing,” according to a report by GeekWire. “In 2016 we made huge strides building out our product offerings across all areas of Google Cloud Platform,” said its CEO Sundar Pichai on an earnings conference call with analysts.
“We routinely hear from customers that we have now moved well beyond table stakes, and we have truly differentiated offerings in four key areas: data analytics and machine learning, security and privacy, tools for application development and the ability to create connected business platforms, leveraging our recent acquisition of Apigee.”
Fortune reports that Google said that revenue from its non-advertising businesses – encompassing cloud services plus G Suite (formerly Google Apps) business application software, Pixel phones, and some other products — grew 62% to US$3.4 billion in sales on an annual basis.
Critics though have a more tepid outlook for these two players. The fact that the two companies do not break out actual revenue specifically from their respective cloud businesses might obfuscate how successful the claim their cloud businesses actually are, they argue.
However, it’s noteworthy to say that this is the same argument critics made against AWS until it broke out its cloud number in 2015. Still taken as a whole, there isn’t any doubt that both Microsoft’s and Google’s respective cloud businesses are growing. The question really is by how much.
Next page: What about Google?
What’s in store for Google
Google on its part started getting into the hyper-scale cloud game a little slower than the rest of the field. After making some headway last year, beginning with the hiring of former respected Silicon Valley executive Diane Greene (pic above), the search giant outlined at its inaugural conference last year why Google is ready for prime time in the cloud and why large enterprises can bank on it as their cloud provider.
Beginning by saying that Google is “dead serious” about the cloud business, Greene went on to tout Google’s strengths: “better value, reduced risks, and continued access to innovation.”
To bolster her assertions, Google had announced a series of customer wins in 2015. It followed up in 2016 with higher-profile customers including Lloyds Banking Group Plc, Spotify Ltd, Home Depot Inc and even Apple Inc, widely regarded as one of Google’s stiffest competitors.
Following the conference last year, CNBC reported in last August that it was apparently on the cusp of snaring a large financial-based customer in Paypal, but there has been no word about this development since. That same month, online note taking app Evernote Corp did sign on with Google Cloud though.
Arguably its largest snare to date is the recently announced US$2 billion deal (over five years) with social media giant Snapchat's parent Snap Inc.
Snapping up (pun intended) Snap is somewhat of a big deal, especially given that the social media giant just debuted successfully on the New York Stock Exchange.
Under Greene’s tutelage, Google Cloud has certainly made strides in convincing large companies that it certainly has the chops to be a reliable, scaled-out enterprise cloud provider.
Critics however argue that while snaring some of these big companies is a great PR coup for Google’s growth, they aren’t necessarily marquee enterprises, not the likes of how AWS has industry giant General Electric and financial player Capital One in its fold.
To be fair, Google certainly has the pedigree to build cloud products and services that can serve the enterprises but the fact remains that it takes time to not only build credibility but also to convince customers to move their workloads onto a public cloud infrastructure.
Industry watchers say one sector Google has some advantage in, or at the very least parity with AWS and Microsoft is artificial intelligence, deep machine learning and deep analytics. Cloud IaaS may be established science but these value added services on top of cloud are still relatively new, with AWS and Microsoft only getting into the game recently.
In this respect, Google has shown resolve having hired a leading AI scientist, Fei-Fei Li, the director of Stanford University’s Artificial Intelligence Lab to drive its initiative. Li will be on hand to address the crowd at Next 2017.
New vs old
As I head out to the conference today (March 8), there are a few areas that I will personally be watching closely. The first will be what Google’s cloud product chief Greg DeMichillie told me last year.
During a pre-press briefing before GCP Next 2016, he had said that Google knows that its competitors have had the time-to-market advantage and a lot more name recognition.
“A lot of [enterprise] customers who want to use [our cloud] just want to know that we got all the right boxes ticked,” he said. “This year, we will spend our time showing the enterprises we are ready for them.”
DeMichillie told Digital News Asia (DNA) on the sidelines of Next 2016 that Google’s ongoing cloud awareness programmes not only comprise general marketing and advertising, but also being active in events like GCP Next 2016, which will have Asian and European chapters. The company will also participate in other independent industry events, he added.
My question then would be how have these efforts gone? Is it better off speaking to C-suite level executives about its cloud proposition?
Secondly, to follow up on what DeMichillie coyly argued that “it’s not about public cloud players competing with one another, but more about public cloud versus on-premises players.”
“People want to position it as us [Google] versus them [our competitors]. The truth is, all of us in the public cloud space only have a miniscule fraction of the total global IT spending potential.
“[So] it’s not about us versus another cloud, but about the public cloud as a whole, taking market share from the existing on-premises business,” he argued.
Again, how is this panning out? Are they taking more market share from old-school enterprise IT giants the likes of Oracle Corp and SAP SE, both of whom have also ramped up its cloud offerings?
These are but some of the questions I hope will be answered, and I certainly hope Google’s second stab at this year’s Next 17 will reveal this and much more of its quest shore up its cloud business.
Edwin Yapp reports from Google Next 2017 in San Francisco, at the invitation of Google Inc. All editorials are independent. He is contributing editor to Digital News Asia and Asean analyst at Tech Research Asia, an advisory firm that translates technology into business outcomes for executives in Asia Pacific.
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