Google Cloud – Significant Opportunities & Significant Competition – 21 February 2020

Could you describe the Google Cloud business – what is noteworthy about the business or the Google Cloud platform?

The timing for our conversation is quite fortunate in that, among other things, Alphabet released Google Cloud revenues for the first time earlier this month, February 2020. What is your assessment? Do you think the USD 9bn in 2019 revenues reported is more or less than what people thought?

I am interested in the overall revenue number but also the growth indication being over 50% for 2019. To frame the conversation about Google Cloud and cloud infrastructure solutions, could you highlight which key themes or trends are impacting the business and this market at large?

Focusing on some of the things you referenced about the competitive landscape, based on what you said – and by many accounts – GCP or Google Cloud Platform is really a distant third in market share in the cloud infrastructure solutions market, well behind AWS and Microsoft Azure. Some research recently indicated Google's market share at around 6% compared with about a third of the market for Amazon and about 18% for Azure. I think it's fair to say GCP has been gaining share, but how would it gain further share and become a stronger competitor as it pertains to the size of the overall business and the size of the market share?

GCP is the number three player in what many people would deem a very large and fast-growing category. Some recent research indicated well over USD 100bn spent on cloud infrastructure solutions in 2019 alone, with annual growth approaching 40%. You mentioned a handful of well-known players – AWS, Azure, we're talking about GCP, you highlighted IBM, Ora cle and Alibaba, especially for the first three primary players, how are you assessing those particular companies? How are the offerings differentiated in the marketplace?

Before you get into Amazon, could you elaborate a little more time on why Kubernetes is important? Is it about the efficiency of the workloads, or the productivity of the cloud service? What exactly is Kubernetes’ differentiator in a GCP environment?

How are you assessing Azure’s differentiation?

Based on what you said, people should continue to pay attention to IBM and Oracle in this space mainly because these companies have been in enterprises for decades and can leverage relationships and legacy technologies – is that the gist or is there more to it?

How would you assess the notion of the competitive environment for winning business? Do you think the GCP offering – with the emphasis on technical expertise, AI and machine learning, Kubernetes – actually helps Google Cloud win business? Are there instances of an enterprise transitioning to GCP because of the technical prowess, for example?

You mentioned multi-cloud and it becoming an increasing trend. Do you think enterprises assess multi- cloud in terms of what they essentially need the cloud service to do – the types of workloads and processes? Is it geographical or if a business has multiple segments, maybe the solutions are more appropriate for a certain vertical, as you said earlier? How are those decisions made? What would you say a typical breakdown is – is there generally a primary and a secondary provider from a multi-cloud perspective, or are they equally allocated, in your experience?

What you say suggests that the biggest participants in this category have comparable offerings in many ways, and there's a fair amount of flexibility for enterprises to move from one provider to another. Presumably pricing could be quite a significant factor in an enterprise’s initial choice – whether it's one or two providers and how they move their workloads and processes. How important is pricing and how do you think providers approach pricing? Are they very aggressive because it allows opportunities down the road, as you alluded to? Or are they cautious of starting down the competitive pricing road because it’s hard to leave that strategy?

Would you say GCP is a more technologically oriented, maybe technologically sophisticated business and offering, perhaps? Then, a couple of the key elements of emphasis include security, big data and analytics – to what extent are those table stakes at this point? Are those some of the areas where GCP can offer some of the value-oriented pricing? What are the examples where GCP differentiates in the marketplace and can make the margin you were alluding to?

Has GCP had or is it more likely to have greater success winning business with certain types of companies? Whether based on geography or vertical, or the fact we're talking more of a start-up-type company vs a legacy provider? You touched on this a little earlier.

Thinking about the concept of hybrid cloud, you also talked about how Google appears to be investing more in security and compliance, to penetrate some of the more highly regulated industries, such as financial services or healthcare. We also have the Department of Defense Jedi contract awarded to Microsoft – which Amazon is contesting – and it would appear that Microsoft's prowess in hybrid cloud played a role in that determination. How important is making progress – not only for security and compliance but also from a hybrid cloud perspective – to Google Cloud Platform gaining new logos, new business and market share?

Do you think it makes sense for Google to allocate significant capital to building out not only its hybrid cloud offerings, but presumably the go-to-market aspects of making it a reality?

I would say there is plenty of intrigue around this – you win the business, then potentially vendors can come and go, maybe they increase in the amount that they do for you. Are there costs associated with making those changes? When we think about the cloud, many of us don't really appreciate the risks related to those types of shifts, whether it's your resources or your workflows, but presumably a fair amount is involved in making those changes. How significant are those costs? Are those costs prohibitive enough to make customers think long and hard about switching costs from one cloud to another?

You referenced Thomas Kurian a little earlier. He is a former President at Oracle and led product efforts, he was there for over 20 years. About a year ago, Kurian essentially became the CEO of Google Cloud. You had some overlap with Kurian at Google Cloud – what are your impressions of him? How has he changed the business? If you were him, what one thing would you do at Google Cloud to make the business more successful?