Google Cloud’s enterprise journey started with Diane Greene and the ‘One Google’ strategy

When Google entered the public cloud market it leveraged the company’s positive reputation among developers as well as technological expertise around machine learning and data analytics from its Search business. However, as a cloud vendor, the company had yet to establish a reputation or a business model that appealed to enterprises. Customer engagements were largely disjointed as G Suite and Google Cloud Platform were sold by different sales teams, making it cumbersome for enterprises to adopt multiple offerings within Google Cloud’s portfolio. To attract and win enterprise customers, Google Cloud hired Diane Greene as CEO in 2015 and created its “One Google” enterprise strategy in which Google Cloud planned to unify its SaaS and PaaS offerings in sales and engineering. Greene’s experience as the co-founder of VMware made her particularly qualified to lead the new strategy, but she was unable to establish the business messaging that large enterprises seek. However, Google Cloud’s value proposition to enterprises has improved over the past three years under Greene’s leadership with a degree of portfolio integration and technology advancement in areas such as machine learning, analytics and Kubernetes.

Incremental improvements are the backbone of Google Cloud’s enterprise-grade platform, Anthos

Over the past year Google Cloud’s momentum has continued to accelerate: Thomas Kurian was appointed CEO, the company partnered with large vendors such as Atos and introduced Google Cloud Services platform, which included hybrid capabilities with Google Cloud’s GKE and its new managed on-premise private cloud, GKE On-Prem. While many of these developments were noteworthy on their own, Google Cloud’s Anthos Platform, announced at Google Next in April, brings together the vendor’s technological advancements and partnerships, as well as new capabilities and infrastructure agnosticism that truly appeals to enterprises.

At its core, Anthos is a rebrand of Google Cloud Services Platform, a multicloud management toolset first announced in July 2018. In addition to GKE On-Prem’s general availability through Anthos, Google Cloud also launched Anthos Migrate, which enables customers to manage workloads running on Amazon Web Services (AWS) and Microsoft Azure. Anthos Migrate automates the migration of virtual machines from on-premises or cloud environments into containers in GKE, which helps simplify migration to Anthos.

The ability to migrate from — or run workloads on — AWS and Microsoft IaaS in addition to Google Cloud Platform (GCP) is vital to Google Cloud’s enterprise strategy, as 30% of enterprises plan to increase the number of IaaS providers in their hybrid environments over the next two years, according to TBR’s 2H18 Cloud Infrastructure & Platforms Customer Research. Further, enabling these organizations to containerize legacy applications on premises in Anthos helps alleviate virtual machine maintenance and OS patching pain points for enterprise IT departments. Migrating to Anthos also enables customers to leverage offerings such as Google Cloud AI in GCP while keeping certain workloads on premises, which is particularly beneficial for organizations facing corporate, government or industry regulations.

Google Cloud’s partner ecosystem will support, sell and augment Anthos to drive customer adoption

Because Anthos is a completely software suite, customers can deploy it on their existing hardware rather than replacing on-premises assets with new infrastructure. For customers that have existing hardware or plan to buy additional infrastructure, Google Cloud hardware partners such as Cisco, and hyperconverged infrastructure partners including Dell EMC, Hewlett Packard Enterprise, Intel and Lenovo are making their offerings compatible with Anthos, enabling customers to configure or purchase the underlying hardware based on their storage, memory and performance requirements.

System integrators including Accenture, Atos, Cognizant, Deloitte, HCL Technologies, NTT DATA, Tata Consultancy Services and Wipro are also developing services and solutions to provide managed services for Anthos, helping Google Cloud customers integrate Anthos into their hybrid environments. TBR expects these partners will drive adoption of Anthos, as they bring Anthos to market and sell the suite to their customer bases, helping expand Google Cloud’s addressable market.

IBM’s Kubernetes-based IBM Cloud Private offers a similar value proposition, but Google Cloud’s expertise in Kubernetes may help fend off competition from IBM, as well as Microsoft and AWS

Google Cloud’s most formidable competitor regarding Anthos is IBM and its Kubernetes-based PaaS offering IBM Cloud Private, which is gaining traction in the market as evidenced by the vendor’s 200 customer signings in 4Q18. Additionally, IBM’s tenure as a trusted enterprise provider makes the vendor a favorable choice for many organizations. However, IBM is also seen by many enterprises as a legacy on-premises provider, whereas Google Cloud is a born-in-the-cloud business with a strictly cloud-oriented business model. In the public cloud market, Google Cloud is growing at a faster rate than IBM, showcasing Google Cloud’s superior perception in the market. In addition to its improving perception among large enterprises, Google Cloud can leverage its reputation among developers to outcompete IBM in the small- to medium-enterprise space.

AWS’ Amazon Elastic Container Service for Kubernetes and Microsoft’s Azure Kubernetes Service are Kubernetes-based PaaS offerings similar to GKE, but the on-premises capabilities for each offering lag behind those of Anthos. Azure AKS will become available on Azure Stack, but the plans to create Azure AKS on Azure Stack were just announced in February. Amazon EKS can connect to Kubernetes apps running on premises, but the capabilities are more limited than those of Anthos as AWS has not yet developed an Amazon EKS on AWS Outposts. TBR expects Google Cloud will be able to fend off competition from IBM, AWS and Microsoft, as Google Cloud — as the inventor of the technology and with a network of more than 20 ISV partners with Kubernetes apps in the GCP Marketplace — has a prowess that may help swing customers in its favor.

This week is one of the busiest weeks of the year for us, with plenty of earnings calls and scheduled benchmark publications.

Tuesday

• TBR’s Cloud Professional Services Benchmark highlights the leading vendors — and strategies — in each cloud professional services market as well as how evolving customer demands are fundamentally disruptive to the market as a whole. Enterprises are increasingly looking for vendors to supplement labor-intensive activities with automation to speed time to delivery and keep costs at bay, forcing vendors to establish more repeatable software and delivery frameworks. While Accenture and IBM continue to lead the market, regional systems integrators and cloud vendors themselves continue to build their solution sets, aiming to close the gap the two leaders have on the market. — Senior Analyst Cassandra Mooshian
• Under new CEO Hans Vestberg, Verizon is streamlining its operations and go-to-market strategies to highlight its strengths as a provider of premium network services. Verizon’s renewed focus on core services follows prior attempts to create growth engines via ventures such as Oath and go90, which ultimately fell short of expectations. TBR’s 1Q19 Verizon Initial Response will examine how Verizon’s restructuring strategies are impacting the company’s profitability and will include assessment on the operator’s early 5G initiatives. — Analyst Steve Vachon

Wednesday

• Market challenges and shifting consumer preferences are impacting investments AT&T has been relying on to sustain long-term revenue growth. For instance, DIRECTV continues to shed satellite customers and struggles to retain DIRECTV NOW subscribers amid the multitude of other over-the-top services in the market. WarnerMedia and Xandr will serve as new growth engines but will face market challenges as WarnerMedia’s streaming service competes against rival offerings such as Netflix and Disney+ and Xandr is challenged by the duopoly of Facebook and Google in the digital advertising market. In TBR’s 1Q19 AT&T Initial Response, we will analyze how AT&T’s WarnerMedia and DIRECTV initiatives are impacting the company’s overall financial performance and assess the operator’s growth initiatives in areas including 5G, IoT and NFV/SDN. — Steve Vachon

Thursday

• To drive cloud revenue growth in the next two years, Accenture’s Cloud practice will rely on its business-centric approach and ability to provide multicloud managed services. At the same time proper pricing scope and staff management are must-haves for Accenture to remain competitive. — Senior Analyst Boz Hristov
• Industry specialization is becoming a central focus of Atos’ strategy as the company articulates and delivers digital value and customer excellence leveraging its technology expertise and partnerships in areas such as security, cloud, IoT and quantum computing. One of Atos’ strengths, which TBR will highlight in this quarter’s initial response, is its ability to strictly execute on the plans it sets for its financial performance over three-year horizons and present consistent messaging to the industry analyst community. — Senior Analyst Elitsa Bakalova
• TBR expects Capgemini will sustain revenue growth through dynamic portfolio management while further improving profitability during 2019. Capgemini is positioning as a leading IT services vendor for clients facing mission-critical challenges. Capgemini helps clients reach their business goals by deepening industry specialization, approaching clients’ C-Suites and selling solutions across the portfolio. — Elitsa Bakalova
• In TBR’s semiannual Global Delivery Benchmark, we report that to sustain revenue growth, vendors have been transitioning from human capital-focused to technology-enabled organizations. However, vendors increasingly struggle to balance navigating the automation-enabled services market with meeting stakeholders’ expectations, forced to use labor arbitrage again. — Boz Hristov

Friday

• Digging into Atos’ Cloud practice, TBR notes that Atos seems to have solidified its cloud strategy and doubled down on its cloud go-to-market efforts over the past year, particularly benefiting from its partnership with Google Cloud and the Syntel acquisition in North America as well as opportunities to capitalize on bringing its cloud solutions and capabilities to Syntel’s customer base in the region, which is underpenetrated by Atos. The challenge, however, will be for Atos to establish, build and maintain brand awareness in North America, particularly as the region is arguably the most saturated cloud market globally.
• We reported in 4Q18 that Fujitsu Services continued to rely on its Japan client base as a primary driver of revenue expansion. TBR expects the same will be true in 1Q19 as Fujitsu reorients its talent in Europe, impacting its sales strategy and access to clients outside of primary focus areas in onshore Europe. While the shift will improve Fujitsu’s marketing and sales efforts in onshore EMEA, Fujitsu Services revenue could face challenges from the losses in offshore areas.

This week TBR will also publish 1Q19 initial responses on public sector-focused and healthcare IT services-centric vendors. Our senior analyst in these areas summed up developments in both as follows:

• Recent and ongoing actions by benchmarked public sector vendors (e.g., Northrop Grumman, General Dynamics) illustrate the priority equivalence of portfolio reshaping, enhancing operational efficiencies, and optimizing supply and service delivery chains to maintain growth and competitiveness in an evolving government IT investment environment. Some providers are allowing low-value contracts on their books to expire without replacement to reposition their business mix upmarket and away from increasingly commoditized technology areas. Despite the turmoil generated by the 35-day partial government shutdown, federal IT vendors saw their primary customer beginning fiscal year 2019 with a budget for the Department of Defense (DOD) in place and, for the first time in a decade, without a continuing resolution. The enhanced stability and predictability of the DOD spending environment is buoying the outlook for defense-focused contractors across the board and generating confidence about 2019.
• Healthcare IT services (HITS) vendors are finding increasing difficulty scaling revenues from existing provider clients simply on the coattails of prior health IT investments. Not only have health systems adopted a more judicious approach to their IT budgeting, but the burden is also increasing on health IT vendors to deliver maximum ROI with every engagement. Pockets of growth exist and new ones are emerging, even as the overall trend in health IT spend moderates. Average contract sizes are slowly expanding for several health IT vendors, particularly the electronic health record (EHR)-centric companies that are seeing more frequent services expansions with existing clients. The diversification of health IT contracts is also forcing vendors to streamline go-to-market approaches for selling wide-ranging solution categories and simplify the process for existing clients to work with them. The maturity of the U.S. EHR market (industry observers estimate 95% of hospitals and 87% of physician practices now have some kind of EHR system in place) is also pressuring HITS vendors to increase R&D to develop new solutions geared toward the impending industry adoption of value-based care and fee-for-value models of care remuneration and delivery.

“We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next 10. Don’t let yourself be lulled into inaction.” — Bill Gates

I think about this statement from one of our industry titans often in the course of my work, and I am starting to think it might need updating. This struck me hard listening to EY blockchain lead Paul Brody give a quick flyover of EY’s blockchain activities during the EY Global Analyst Summit held in Boston April 10-11. The event was very much a teaser for the upcoming EY Global Blockchain Summit.

General ledger history and blockchain as record keeping 2.0

Blockchain is a distributed ledger. It is a multienterprise business ledger and an evolution of the general ledger that has underpinned independent business record keeping for centuries. I consider the rate and pace of change and Gates’ quote above in that context when comparing general ledger adoption to blockchain adoption. Here are my log length — or rough cut — guidelines for calibrating the time it took for ubiquitous adoption of general ledger accounting, all sourced one evening for my idle curiosity on Wikipedia and Investopedia.

Luca Pacioli gets credit for creating the concept of double-entry bookkeeping in 1494 in Italy. As one would expect on Wikipedia, there’s debate about the timing, with some saying it was earlier. Log length the date to 1500.

The bigger challenge for me was searching for when general ledger accounting saw ubiquitous, global adoption. There is much written about public policy activities in the early 1900s in Brazil, which was not an economic powerhouse at that time, so one I would consider to be a laggard. In 1914 Brazil’s legislature sought to move its government to double-entry bookkeeping. However, that initial move did not really become codified until 1924. Log length that date to 1900.

In my opinion, based on this casual research, it took roughly 400 years for the general ledger to reach global adoption as a business and regulatory best practice. Throughout those 400 years, we had business cycles. We had disruptions. We had public policy leaders in deliberative bodies reacting to disruptions.

Are we overestimating or underestimating blockchain?

Blockchain has been around a little more than a decade. IBM has made big splashes with food trust, shipping and finance networks and now talks about the network of networks. In 2018 I attended EY’s global blockchain event and listened to what EY was doing with Microsoft around what is now called the Xbox network. I returned from this and other emerging technology events around quantum and been told to “lay off the caffeine,” that these technologies are years away. I regularly temper my timetable, thinking I am overestimating the two-year horizons and not heeding Gates’ prescient advice from the ‘90s.

And then I stand in the back of the EY main event with about 15% of the other attendees and get blown away by Brody as he speaks in a cadence reminiscent of the iconic Federal Express commercial to run though the progress EY and its customers have made in a year. I wonder in the moment if I am underestimating how soon blockchain will be delivering real business value to major enterprises and the small business partners with the technology vision and managerial agility to adjust their business models to these new record-keeping efficiencies.

The only thing I am certain about is uncertainty in an industry I’ve thought intensely about for over 35 years. The digital age is here in its embryonic form. It is more than a business rebirth; it is a societal rebirth in that digital changes business, government and daily human activities. Birth can be a wonderful thing, but labor can be a very painful process. Change management, as we hear time and time again at analyst events can, likewise, be a very painful process.

It took 400 years, multiple business boom and bust cycles, and countless public policy iterations for economic regulatory activity to stabilize, for the most part, after the great depression of 1929. Business models can now change far more rapidly than our deliberative bodies adapt their regulatory oversight practices. I used to think blockchain would spread at 10 times the rate or be ubiquitously adopted in 40 years. But I’m beginning to think that is a gross overestimation given how badly I underestimated what I thought was possible in a year. It makes me wonder if the signature Gates quote is ripe for refinement.

I look forward to learning more from Brody and the rest of the EY Blockchain team on April 16 in New York.

Over the past several months, TBR has seen increased activity and interest around the topic of channel and alliance strategy across our 12 ICT industry coverage domains. While channel and alliance strategy is a pervasive topic, the intensity and tenor of the questions posed recently signal an increased focus around deploying industry-leading partnering strategies to pursue long-term growth.

Some of the common recent questions we’ve fielded from our clients include:

• We’ve been partnering with global systems integrators (GSIs) for years, but our relationship in this emerging technology or service area is new. What is the right engagement model for this new area? What revenues can we expect? How do we establish a stronger relationship than our peers?
• Our competition in this new portfolio area has stronger relationships than we do. How do we develop programs, incentives and recruitment strategies to secure partner engagement?
• What are the right partners to engage with to achieve our objectives in this area? What type of programs, engagement models, incentives, benefits and management structure will resonate with those partners?

While these questions themselves aren’t entirely new territory, the systemic market forces that underpin them are certainly disruptive to partnering models for many ICT providers. The quote below, from TBR’s 1H18 Cloud Applications Customer Research, speaks to how the economics of cloud and digital IT consumption impacts the role of the services partner in applications deployment:

“Partners are still an integral part of almost every deal we do, but most deployments are no longer $10 million to $20 million to get it installed — now [it’s] just about $1 million. Many companies have shrunk their IT departments over time because of cloud, leading to skills gaps, so partners are so important.”

— Senior Director of Procurement, Telecommunications

Partners will continue to fill a critical role for enterprise customers and, by proxy, leading technology companies, but digital disruption will continue to shift how vendors think about partner roles. A few ways we are seeing technology disruption impact vendors’ partner programs and strategies include:

• Self-developing Partner Ecosystems: Firms are creating formal programs and incentives to encourage partner-to-partner relationship development and joint go-to-market activity (i.e., a marketplace ISV engaging with a reseller to jointly support a customer).
• Partner Stickiness and Specialization: Leaders use partners as a conduit to specialize by industry, use case or region, and are encouraging partners to expand portfolios and enhance industry and/or solution specialization (i.e., cross-training ISV partners as implementers in an industry).
• Partner Journeys: Vendors are reconsidering traditional partner tier structures and aligning program tier requirements and benefits to reclassify partners around long-term value opportunity versus purely revenue generation.

I’ll be conducting a webinar on Wednesday, April 17 at 1 p.m. EDT that will dive into these trends and others in greater detail. Click here to register for the webinar. For questions on this or anything else, you can contact me at [email protected].

Over the last two weeks, TBR has spent time with three leading IT services and consulting vendors, discussing their strategies for evolving digital transformation and hearing from their clients about what has worked and where frustrations remain. Two common themes came out of these discussions: industry-specific offerings and market disruption.

While we’ve frequently commented on the industry-centric culture and mindset of some leading IT services vendors and consultancies, we’ve typically seen their partnerships with technology vendors revolve more around horizontal solutions and emerging tech capabilities. One substantial shift of late has been a new focus on coinnovating, developing, and taking to market offerings and solutions designed specifically for industries, or even subverticals within an industry. This isn’t completely new, although the emphasis may be, and a sustained investment would solidify this trend. But the real implications, we think, will come for the IT services vendors amid their pivot to an industry focus. One of the leading vendors, a company as deeply ingrained with industry expertise as any of the Big Four firms, discussed its plans to roll out new industry-specific offerings with a leading software provider, noting that the companies together chose industries best suited to match their combined strengths. In contrast, we understand other large IT services vendors continue to struggle in pivoting to an industry-centric organization (never mind an industry-expertise culture). If these large vendors cannot identify their strengths and opportunities as well as their best-match software partners, they’ll fail to differentiate as the market moves to industry-centric digital transformations.

The second theme, disruption, is something that everyone is talking about. No analyst event, client meeting, or tour of an innovation, immersion or experience center passes without the discussion turning to how disruption in the market forces quicker decision making and faster actions. What emerged during my discussions with all three vendors these past two weeks was the clear distinction between internal and external disruption and the role an IT services vendor or consultancy can play in assuaging one and stoking the other. Clients spoke at length about the role their IT adviser played in ensuring core systems and operations would not be disrupted, even as the enterprise itself, including IT, went through a digital transformation. The three companies we met with described their role in providing trust, assurance, hyper-care attention to issues and problems, and everything from the road map to the running-at-speed implementation for clients both ready to change and nervous about the risks involved. Clients also expressed their fears of external disruption from traditional and nontraditional competitors, technology partners unable to deliver, and market forces moving faster than their systems can manage. While IT services vendors and consultancies haven’t created these fears, TBR can appreciate that a little uncertainty isn’t such a bad thing.

We will explore both issues in greater detail in our upcoming Management Consulting Benchmark as well as in the monthly deliverables in our Digital Transformation Insights portfolio. Stayed tuned.