In earnings reported this week, Alphabet announced that Google Cloud generated a robust $2.61 billion for the quarter, a number that includes revenue from both Google Cloud Platform and G Suite.
That puts the division on a nice little run rate of $10.44 billion. It feels like a lot until you consider that Microsoft had a combined software and infrastructure cloud revenue run rate of $12.5 billion in its most recent report, while AWS reported almost $10 billion for the quarter. Although Google is not even close to these rivals, it’s picking up some much-needed steam.
As Holger Mueller, an analyst at Constellation Research, points out, crossing the $10 billion run rate mark is a rite of passage. “Ten billion dollars is the new mark for IaaS players, effectively the unicorn rating for them. And revenue/size matter, as the cloud business is an economies of scale business,” Mueller told TechCrunch.
More enterprise, please
When Thomas Kurian came on board last year after more than two decades at Oracle to replace Diane Greene as head of Google Cloud, prevailing wisdom suggested that he was hired to help shift the division’s focus firmly to the enterprise. The move appears to be working.
In an interview last year with TechCrunch’s Frederic Lardinois at the Google Cloud event, Kurian talked about meeting with hundreds of customers to learn what the division did well and where it needed to improve. One of the things he heard was that Google simply didn’t have enough support people for the enterprise audience and suggested he would fix that in the coming year. “A number of customers told us, ‘we just need more people from you to help us.’ So that’s what we’ll do,” he said.
He also brought in some enterprise veterans, naming Amit Zavery from Oracle as Google Cloud’s VP and head of platform and SAP sales vet Rob Enslin as president of sales. Enslin brings 27 years of enterprise experience, including a stint as president of SAP North America, while Zavery spent almost 25 years working at Oracle, much of that time side-by-side with Kurian.
Mueller says these kinds of moves have been game-changers for Google Cloud. “It has developed from a one-trick pony to a multiple-offering player, and with the arrival of Enslin, it has added enterprise sales know-how and CxO access,” he said.
Google Cloud’s new CEO on gaining customers, startups, supporting open source and more
Miles to go
The good news for Google is that there is still plenty of cloud market to conquer. The trouble is that Microsoft has about twice the market share of Google and AWS has almost double that of Microsoft. Those numbers are daunting, but all Google can do is put one foot in front of the other and try to produce better results. Certainly, it did that this round, but it must find a way to keep repeating until it achieves double-digit market share and go from there.
Alphabet CEO Sundar Pichai was trumpeting the growth in the company earnings call with analysts earlier this week, pointing to growth in hospitals and healthcare, as well as retail, an area where Amazon is vulnerable because many major retailers are reluctant to give the world’s largest e-commerce company their business. He also pointed to larger deals and a better go-to-market system under Kurian.
“We are really pleased with the momentum we are seeing in Cloud. Year-on-year, the number of deals over $50 million more than doubled. The investments in Cloud’s go-to-market expansion are resulting in customer momentum,” Pichai said in the call.
According to Synergy Research’s latest numbers, the market looks like this after the most recent earnings reports: “The actual Q4 market share numbers are Amazon 33%, Microsoft 18%, Google 8%, IBM 6%, Alibaba 5%, Salesforce 3%, to the nearest percentage point. Oracle, Tencent and Rackspace each has a 2% market share.”
According to Synergy’s latest data, Google is in the “high growth and gaining market share” quadrant, which is where it wants to be, but it has IBM, which just hired a new CEO and president, and Alibaba, a rather late comer to the cloud, right on its tail. Alibaba has the advantage of having full access to the expansive Chinese market.
John Dinsdale, chief analyst at Synergy Research, says the $10 billion run rate is a good number, but you have to keep it in perspective, given the performance of Microsoft and Amazon ahead of it. While Google’s market share has been growing slowly but steadily over recent years, it still has much work to do, he said.
“It is certainly possible to improve its market share. That will take continued good performance in a variety of areas, including long-term management focus on cloud, continued heavy investment in data center infrastructure, ongoing service development and enhancement, a big focus on strengthening sales and support activities for large enterprises and smart marketing.” These are all things the company has been working toward both under Greene and even more so under Kurian.
The bottom line is that Google Cloud has to keep building on the momentum it has been showing since it first reported a billion-dollar quarter in 2017 under Diane Greene. It has chosen enterprise veterans to lead the way, and so far the results have been promising. They don’t necessarily have to catch Microsoft or Amazon to be successful, they just have to keep stringing together more good quarters like this one.
Google Cloud makes some strong moves to differentiate itself from AWS and Microsoft
Comment