Analyst Commentary

Google competitors beware: Google’s enterprise cloud commitment will elevate its brand and revenue across high growth markets

Below is TBR’s commentary on Google's cloud business. Please feel free to use this content with TBR and analyst attributions. Contact Jillian Mirandi at (603) 929-1166 or for additional commentary.

Google Cloud Platform investments and a maturing strategy that leverages ISVs as an enterprise channel will push Google onto a level playing field with AWS

TBR expects Google’s cloud business to grow 84% annually to $1.6 billion in 2014. While Google drives just under two-thirds of revenue from Apps today, TBR believes Google’s biggest opportunity in cloud lies with Google Cloud Platform. While Google Apps provides a broad customer base and inroads to the government and education sectors, Google Cloud Platform (which consists of Google App Engine and Google Compute Engine) can transform the market alongside Amazon Web Services (AWS). Today, AWS’ technology and go-to-market strategy is more mature than Google’s, but recent Google investments will elevate the business and, for the first time, give AWS real competition. Google has the capacity to compete on price with AWS, given both vendors’ data center efficiencies, and has the ability to quickly innovate, given the nature of its scalable technology, its world-class team of developers and its seemingly wild and crazy ideas (like floating data centers) that enable the company to leapfrog competitors. The ability to continuously innovate, launch and improve products has been a key differentiator for AWS thus far, and will be a differentiator for Google too, launching both companies ahead of the market, but placing them in greater competition with each other.

Google Cloud Platform’s enterprise strategy is different than AWS’ enterprise strategy in that Google does not want to work directly with enterprise customers at this time. Google is targeting ISVs looking to “SaaSify” their solutions, and then will leverage those ISVs, along with MSPs, as a channel to the enterprise. In this way, Google will remain focused on its strong suit — technology — and leave ISVs and MSPs to support enterprise relationships. Google will expand partnerships with SIs to support Google Cloud Platform, the first being Dell Services. This relationship helps Google get into enterprises while enabling Dell to offer higher-value and higher-margin support and management.

Google I/O announcements in June included the launch of Google Cloud Dataflow, a successor to MapReduce in BI and analytics, new cloud monitoring tools from Google’s May acquisition of StackDriver and new features around mobile development, including updates to Android studio that more easily integrate App Engine back-ends to Android apps. These announcements were, unsurprisingly, followed by similar mobile announcements at the July AWS Summit in New York.

Google revamps Apps, solidifying its position in the enterprise productivity space and increasing competition with Microsoft Office

Google Apps provides the company with a simple, low-cost and cloud-based productivity suite that most consumers are familiar with through Gmail. To ready Google Apps for enterprise usage, Google improved Drive, Docs, Sheets and Slides across June and July to serve the broader enterprise and to elevate competition with Microsoft O365 as well as file sync, share and collaboration tools like Microsoft OneDrive, Box and DropBox. Improvements focused on user interface, functionality and the capability to edit Microsoft Office documents with Google Apps. Out-of-the-Box editing capabilities with Microsoft Office reduce a major barrier for businesses that want to leverage a combination of tools from both vendors. Google Drive for Work, launched in July, is a premium version of Google Apps, offered at $10/seat/month, dropping Google Apps for Business pricing to $5/seat/month. Features in the premium package include unlimited storage, an API audit for developers, and industry-specific compliances, including HIPAA for some of its tools.

Over the past year Google announced marquee customer wins for Google Apps including Whirlpool, the state of Maryland and Boston, but it has yet to win major deals on its Cloud Platform (which includes Cloud Compute Engine and Cloud App Engine). Cloud Compute Engine was released for general availability in December and has been making headlines for technological investments and price cuts, but Google has yet to publically announce an enterprise customer.

Google invests in managing and moving cloud applications

One of the more forward-looking investments Google is making is Kubernetes, Google’s open-source technology for managing Docker containers. The enterprise and developers want to run applications across hybrid environments more easily. As environments gain complexity, containerization and management become increasingly important. The goal is to enable developers to code applications in various languages and platforms, ship them, and have them work automatically on various other languages and platforms. The Kubernetes project, paired with ongoing developer-focused Google investments, will drive developers to Google’s business-focused cloud suite to add industry-specific applications as well as horizontal applications. Opening APIs in mobile, social, maps and analytics makes Google’s platform increasingly attractive to developers; and the platform that wins with developers will win in cloud.

Technology that comes out of Kubernetes and paired with Google Endpoints (launched in November) will help customers solve an increasingly challenging problem stemming from cloud environments — managing, moving and substantiating cloud applications. To underscore the importance of the problem Google is trying to solve, competitors Microsoft and IBM, along with Red Hat, are supporting and contributing to the project.

Google’s latest move in big data hinges on fitness wearables and will eventually drive the business deeper into the healthcare vertical

The healthcare vertical provides a large opportunity for cloud vendors with no clear winner as of yet. In July, Google announced Google Fit, a platform for acquiring and consolidating fitness data from wearable devices. TBR believes Google Fit will expand from fitness into health data, which will become the backbone of Google’s healthcare-focused cloud and analytics business (an industry in which many cloud vendors are making investments). Today, Google Fit is targeting consumers, but Google’s end goal is to provide data and analytics to the healthcare market (e.g., insurance companies, hospitals and medical practices, pharmaceuticals). Google Fit, along with Google’s cloud business, Android, Chrome and Nest, among others, serves as another endpoint Google will use to collect data. With Google Fit, Google moves further into the big data, analytics, devices and public cloud space. Many device and cloud vendors such as Google, Apple, Microsoft and even are investing in similar healthcare-related platforms.

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