Google Means Business When it Comes to Cloud

February 2, 2016, 12:38 AM UTC
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SAN FRANCISCO, CA - MAY 28: Google senior vice president of product Sundar Pichai delivers the keynote address during the 2015 Google I/O conference on May 28, 2015 in San Francisco, California. The annual Google I/O conference runs through May 29. (Photo by Justin Sullivan/Getty Images)
Photograph by Justin Sullivan—Getty Images

Google expects to see significant traction in its public cloud business next year, Google chief executive Sundar Pichai said Monday.

The company, he noted, pioneered many of the technologies that underlie a public cloud—massive pools of servers, fast networking and huge amounts of storage—on which it has run its own operations from search to YouTube for nearly 20 years.

“We can take this computing power and optimize it for all customers, and we are now able to bring this to bear just as the movement to cloud has reached a tipping point,” he said on the Google (GOOG) fourth quarter earnings call.

“Public cloud services are a natural place for us.”

The public cloud model is one in which customers rent computing power, storage, and networking from a shared pool of resources operated by a cloud provider. Instead of shelling out for new servers or storage boxes, they rent computing power by the hour or minute, and storage by the gigabyte. Increasingly, many businesses see this as a viable option compared to spending more money building out their own data centers.

“We are at the point where the product is ready to be used at scale,” Pichai added, referring to the Google Cloud Platform.

He also claimed that four million applications already run on Google’s cloud infrastructure. That’s an aggressive number and he did not name names, but, for better or worse, Google’s cloud is most famous for running messaging service Snapchat, which may be impressive, but is not really the sort of application that big companies are looking to use.

If it’s to compete with Amazon (AMZN) Web Services, the leader in the category or Microsoft Azure, Google needs to prove its bona fides in running big-boy corporate applications.

Pichai also touted advances Google has made in key areas including machine learning and data analysis that it can bring to bear in this market.

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Just how much Google, which has been a consumer-focused company to date, cares about selling anything—cloud or otherwise—to big companies, has been a subject of debate for a few years now.

As if to prove its honorable intentions, in November, the company hired Diane Greene, former chief executive of VMware (VMW) to run its enterprise business. Greene is seen as someone who gets what enterprise technology buyers want to see from their vendors.

And its done things to make buying its cloud services easier for businesses. Even AWS junkies, lauded Google’s automated discounts of its cloud servers that kick in when a certain usage limit is hit. That’s a nice perk for IT pros who are weary of tracking cloud usage with spreadsheets and other tools to monitor ever-changing discount structures. Late last year it also introduced a way to make it make buying its cloud more flexible.

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Given how much money Google makes from search and ads, it’s easy to understand the skepticism about its corporate cloud efforts. And, in response to a question, Pichai acknowledged that Google has to show it’s serious about this business “which we are.” And, he said the company is taking customer feedback to address feature requirements.

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Microsoft (MSFT) is attacking that market with a vengeance with Azure, capitalizing on pre-existing relationships with business customers. AWS, which started down this path way back in 2006, is the prohibitive leader in public cloud services, but to be fair to Google, Amazon with its e-commerce roots had to learn those big-business sales skills as well.

Ironically, it may have been AWS, which is on track to be a $10 billion-a-year business, that’s persuaded Google that cloud services constitute a huge business.

For the quarter, Google spent $1.8 billion on capital expenditures or capex. That covers real estate and the construction of data centers needed to run cloud and other services. The full year’s capex was $8.85 billion. Google CFO Ruth Porat said the vast majority of that money supports Google’s core business, including cloud, not moonshots like self-driving cars.

“We view our computing capacity as a core competency and will continue to invest in providing efficient, secure computing for both our consumer products and services globally as well as our cloud and apps business,” she said

And, she noted that the “shift to cloud by enterprises” is, in and of itself, a moonshot for Google.

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