- For many years, analysts were skeptical of Google Cloud being able to catch up to Amazon Web Services and Microsoft, but Google Cloud CEO Thomas Kurian is spearheading several changes.
- Analysts point out that Google Cloud made several new leadership hires this year, which they see as costly but worth the investment if it translates to winning bigger customers.
- Google Cloud is poised to go from an $8 billion cloud business today to nearly $17 billion in revenue in 2021, Deutsche Bank research analyst Lloyd Walmsley wrote in a note for clients.
- It still doesn’t have as many deals with large enterprises, but these companies are starting to at least consider Google Cloud, analysts said.
- The platform also has an advantage because it’s known for being friendly with developers, who are becoming more influential in picking what cloud to use, analysts said.
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For years, analysts were skeptical that Google Cloud could ever catch up to its rivals Amazon Web Services and Microsoft — the first- and second-place cloud providers, respectively.
Karl Keirstead, the managing director at Deutsche Bank, told Business Insider that he thought Google Cloud would remain a “distant third.” But the arrival of Google Cloud CEO Thomas Kurian, who came from Oracle, “changed everything,” he said.
For one thing, Kurian has been making several new leadership hires at Google Cloud, which Keirstead calls “one of the most impressive bursts of hiring that we’ve ever seen from a large tech firm.” What’s more, even though Google Cloud hasn’t scored many “megadeal wins” yet, he said that large companies were increasingly viewing it as a viable option.
“He’s built a fantastic leadership team, essentially pulling talent from other tech organizations that also serve the large enterprise market,” Keirstead told Business Insider.
The reason for the earlier skepticism didn’t have much to do with Google Cloud itself.
“Having been built by Google, it’s world class,” Keirstead said. “Google has never built up an enterprise-sales marketing branding and presence that can hold a candle to Microsoft. Whereas Amazon started relatively early and also didn’t have as much of an enterprise presence; they just had longer to build it out.”
In the bigger picture, Google Cloud is making the right investments in hiring and infrastructure — and it’s poised to go from an $8 billion cloud business today to nearly $17 billion in revenue in 2021, the Deutsche Bank research analyst Lloyd Walmsley wrote in a note for clients.
“It’s money well spent, and I think they will be able to scale to margins that look more to AWS in the next three to five years,” Walmsley told Business Insider. “We don’t think, looking three years from now, they’ll get to AWS on the same scale, but we think they can get to attractive margins on a three to five year basis.”
Under Kurian, Google Cloud plans to triple its sales force, in a move seemingly taken from his former employer Oracle. To help manage all that growth, Google Cloud has made some key hires.
Keirstead highlights said the former SAP exec Robert Enslin, Google Cloud’s president of global customer operations, is a key hire. Others include Amit Zavery, a vice president and the head of platform, from Oracle; Europe, Middle East, and Africa President Chris Ciauri from Salesforce; Sunil Potti, an engineering vice president, from Nutanix; and Yanbing Li, an engineering vice president, from VMware.
Those hires are a good start, the Deutsche Bank analysts said: It’s not cheap to attract hires of that caliber, they said, but it’s a worthy investment in helping signal to would-be customers how serious Google Cloud is about winning their business. However, the analysts said, that doesn’t automatically translate into winning those big deals.
Read more: Here are 12 of the most important executives leading Google Cloud as it takes on Amazon Web Services and Microsoft Azure
The ‘larger-deal wins are likely to come’
Keirstead sees rising interest from Fortune 500 companies, making him “confident that the larger-deal wins are likely to come.”
Keirstead said he hasn’t heard about many Fortune 500 companies fully embracing Google Cloud, but winning large deals against AWS or Microsoft will take time. Some of Google Cloud’s recent major customer wins include HSBC, Mayo Clinic, Macy’s, and KeyBank.
Keirstead said that he recently attended a Google Cloud event in New York City with mostly financial services and banks in attendance. He said that while it’s true that most of them weren’t Google Cloud customers, there’s something to be said for the fact that these old-school institutions were at least taking it under serious consideration.
“They tend to be cautious buyers that move relatively slowly,” Keirstead said. “This will be one of the last big markets that Google Cloud will end up going after. We took some comfort in the fact that some very large banks were there, evaluating Google Cloud.”
Another aspect Google Cloud will have to fix is cultural. While Google has traditionally focused on the technology above all else, Walmsley said, it will have to learn how to take customers’ concerns more seriously and act on them.
“That’s something culturally that may still encumber them,” Walmsley said.
‘Currying favor’ with developers
Under the legacy IT model, it was the chief information officer or chief technology officer who made major technology decisions, like picking which cloud to use. However, as evidenced by Microsoft’s purchase of GitHub, cloud providers are becoming aware that it’s increasingly developers who drive IT spending.
He said, in this sense, Google has an advantage because it’s active in open source, the community of developers who write software that’s free for anyone to use and download. Google engineers often contribute code to popular projects — the popular cloud project Kubernetes was even created at Google.
In comparison, while Amazon’s cloud is known as being developer friendly, it has a reputation for using open-source code without giving anything back, Keirstead said. He said that, anecdotally, smaller startups were increasingly looking at building on Google Cloud rather than AWS, which he takes as a reflection of Google’s strength in open source.
“Currying favor with and providing good functional software to the developer community is fairly essential and becoming a big strategy for the cloud providers,” Keirstead said.
With developers on Google Cloud’s side, Keirstead says what’s left is to grow its sales.
“If they can scale up the leadership team and close the sales gap with Microsoft and Amazon, I think that’s all they need to have a legitimate market share in that space,” Keirstead said.