Clouds are becoming the standard for enterprising computing. Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google Cloud offering has been getting left behind.
But under a new business-suited leader, Thomas Kurian, formerly a senior vice president at Oracle (NASDAQ:ORCL), that is supposed to change, with thousands of new salespeople and a commitment to supporting open source.
It’s a two-pronged attack.
The salespeople are a move against Microsoft (NASDAQ:MSFT), the leading cloud platform, which dominates enterprise computing. Open source is a move against Amazon (NASDAQ:AMZN), the leading cloud infrastructure company, which has been squabbling with major open source projects who claim it violates the spirit of their licensing.
The battle for the enterprise cloud is on.
Kurian’s Way
Kurian and his suits are part of the message.
Google CEO Sundar Pichai seems to only wear ties for weddings and congressional testimony. Kurian’s image is aimed at enterprise sales, at customers moving off Oracle. Even when appearing tie-less, he retains the jacket and a button-down shirt.
In addition to hiring a sales team, Kurian is building Google’s third-party channel. The open source partnerships are a shot across the bow at International Business Machines (NYSE:IBM), which bet the company on hybrid cloud and open source in buying Red Hat (NYSE:RHT) last year. So is BigQuery, a spreadsheet database, meant to prove that only the scale of a Cloud Czar can deliver what big enterprises need.
Kurian’s plan is also based on interoperability. Google Cloud not only wants to connect enterprises with cloud rivals, but with rival cloud applications from Salesforce (NASDAQ:CRM) and SAP (NYSE:SAP) databases. Kurian even has a Microsoft LinkedIn page. Noticeably absent from all this is Oracle.
Anthos, a new container management system based on open source Kubernetes, allows use of Microsoft and Amazon clouds, as well as Google and private clouds, for enterprise applications. Tools like IntelliJ and VSCode, connected to containers, are for cloud-native applications. Kurian also announced the company’s first vertical-market cloud solution, a collection of tools for large retailers.
Google is bulking up its G Suite applications, which compete with Microsoft Office. Google killed its Inbox service and is standardizing communications of all types inside Gmail.
The Prize
Gartner Group estimates $1.3 trillion in enterprise spending will be shifted to the cloud by 2022, with the greatest shift being in infrastructure. Private cloud spending is growing at over 30% per year, public cloud spending at over 20% per year, at the expense of spending on traditional data centers.
This growth is what justifies the $900 billion valuations placed on the three leading cloud players. Apple (NASDAQ:AAPL) is building out paid services on its cloud, while Facebook (NASDAQ:FB) continues to focus on free services with its cloud. The message of Kurian this week is that the effort to bring everyone else into the cloud has become a three-way race.
The Bottom Line on Google Cloud
Most Google revenue still comes from its free public services, from search, Maps and YouTube. That’s the base on which it is building its enterprise cloud business. That’s the heart of its cash flow.
For now, there is plenty of enterprise cloud business to go around among the Big Three, and even among suppliers like Dell (NASDAQ:DELL), service companies like IBM and cloud-based software vendors like Salesforce.
It’s a big investment that will cut margins in the short term. Last year, 22% of Alphabet’s $137 billion of revenue went to net income. But the enterprise computing opportunity won’t come to the Cloud Czars twice. Google’s message this week is it will pay to be a player.
Dana Blankenhorn is a financial and technology journalist. He is the author of a new mystery thriller, The Reluctant Detective Finds Her Family, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing, he owned shares in MSFT, AAPL and AMZN.
