Google Cloud CEO Thomas Kurian at Google Cloud Next 2019
- Analysts were skeptical for many years 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.
- Google Cloud still doesn't have as many deals with large enterprises, but these companies are starting to at least consider Google Cloud, analysts say.
- Google Cloud 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 say.
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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, managing director at Deutsche Bank, tells 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 "mega-deal wins" yet he says that large companies are 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
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, 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."
New hires
Under Kurian, Google Cloud plans to triple its salesforce 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 says former SAP exec Robert Enslin, president of global customer operations, is a key hire. Others include VP and Head of Platform Amit Zavery from Oracle, EMEA President Chris Ciauri from Salesforce, Engineering VP Sunil Potti from Nutanix, and Engineering VP Yanbing Li from VMware.
Those hires are a good start, say the Deutsche Bank analysts: It's not cheap to attract hires of that caliber, they say, 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 warn, that doesn't automatically translate into winning those big deals.
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 says 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 says 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 CIO or CTO 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 says 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 says. He says that, anecdotally, smaller startups are 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.
