Google Finds Itself Playing Catchup with the Cloud

    August 30, 2016
    avatar

    By Bill Andruss

    Hustling to match the strong revenues of competitors in the space, Google is finding itself in unfamiliar territory when it comes to cloud services — far behind the pack.

    Google, a longtime leader in global tech innovation, finds itself playing second (or perhaps even third) fiddle in the cloud services market, one of the fastest growing in the industry. Despite its impressive network of data centers — a network that some think to be larger than the internet itself, according to the New York Times — Google has struggled to keep pace with competitors Amazon AWS and Microsoft Azure (and arguably IBM), lagging behind the former by appreciable margins.

    It’s not for lack of effort, however. The tech giant is leveraging every bit of its innovative arsenal and buying up promising cloud startups to bring service quality up and costs down. And despite Amazon’s nearly mythical rate of cloud growth, Google appears to be gaining ground. For cloud customers, this is good news — more vender optionality means greater flexibility, more control over capacity, and with the right approach, greater value for the business.

    A Significant Deficit

    In fairness to Google, it’s hard to overstate Amazon’s domination of the market. As Business Insider notes, AWS’s $8.9 billion in public cloud revenue over the past 12 months is nearly 15 times that of Google’s (an estimated $0.6 billion), and a heaping margin over the second-place Microsoft, which pulls in $1.8 billion in cloud revenues. In fact, AWS is expected to generate roughly $12 billion this year, representing more than half of the entire cloud services market, reports CNBC. Granted, Amazon had a head start building out its sprawling cloud offerings, having started cloud over a decade ago (compared to Google’s 2011 Cloud Platform launch).

    But Google’s innovation engine is running at full steam, granting impressive advantages. The company has been able to cut power costs at its cloud data centers by 15% by applying artificial intelligence diagnostics. It’s also been able to reduce the prices of some services (it originally undercut the search advertising market in much the same way).

    Google’s preemptible virtual machines (VMs), for instance, as now as much as 33% cheaper as of August 9th, reports TechTarget. Preemptible VMs are regular instances that are currently being unused — customers can use them temporarily and at low cost until demand returns.

    And what Google can’t develop, it purchases. Since May, Google has purchased: Orbitera, a cloud billing and processing automation startup; Anvato, a cloud-based video and storage platform; and Synergyse, a “virtual coach” that trains companies on the use of Google products like Gmail and Docs, as Re/Code reports. So far, the potential earning power of these combined investments is promising.

    Playing on Par

    Despite Google’s comparatively modest Cloud Platform gains — if you can call a 33% yearly revenue growth of its “Other Bets” segment modest — they have much room to grow. Its already-massive data center infrastructure gives it the ability to rapidly scale its cloud program, should it choose to reorient existing resources. That’s not altogether unlikely, given that Google Technical Fellow Urs Höltze recently predicted that Google’s cloud services would outpace its $65 billion advertising wing within five years.

    Will Google catch up to its competitors? That remains to be seen. But as Google decides how to reallocate its resources to compete (or try another strategy altogether), cloud customers will have to play close attention to their own evolving infrastructures in order to receive the maximum value for their cloud spend.

    That may mean working with any mix of Google, AWS, Azure, or a variety of smaller vendors. For Google, as for cloud clients, maintaining the ability to closely manage their capacity, scaling at just the right places and times, is the key to success.

     


    Category: cloud-computing