Google Cloud is frequently named as one of the big three cloud providers, but the harsh reality is that it remains a distant third to Amazon Web Services (AWS) and Microsoft Azure.
Analysts told Silverlinings that Google Cloud’s channel strategy is one of three keys to closing the gap over the next few years. Learning to speak the language of legacy IT wouldn’t hurt either, they said.
“It’s not as if Google isn’t doing the right things,” Hariprasad Pichai (not related to Alphabet CEO Sundar Pichai), principal at telecom and cloud advisory firm Arthur D. Little, told Silverlinings. He noted Google Cloud now has feature parity with its larger rivals and is bolstering sales staff. But still, Google has around one-third of the cloud channel scale as AWS or Microsoft.
“The importance of channel cannot be overstated over the next two years,” he said. “You cannot build scale organically in these kinds of markets and in this environment. So, if you can’t square up a channel execution strategy very well, you’re not going anywhere with your sales.”
Data from Synergy Research Group shows cloud infrastructure service revenue – including infrastructure-as-a-service, platform-as-a-service and hosted private cloud services – hit an estimated $61.6 billion in Q4 2022. AWS dominated the market with a 32% market share with Microsoft increasing its second place share by two percentage points to 23%. But while Google also increased its share slightly, it trailed substantially with just 11% market share. This despite investing billions into its cloud business.
What gives, Google Cloud?
Looking back to the beginning, Pichai said that AWS and Microsoft each had natural jumping off points back when they first got into the cloud market. AWS got its start as a pure infrastructure provider while Microsoft used its presence in the enterprise collaboration space as a beachhead to begin selling enterprise cloud products.
The commonality between them, Pichai noted, was that both companies spoke the language of enterprise IT to explain where and how the cloud was relevant to their customers.
Google, however, came from a consumer-oriented background, one in which its products like Gmail and Search mostly sold themselves and scaled without too much marketing or customer service support, Pichai said. And as a cloud-native company, it didn’t really have the language to properly engage with enterprise IT clients.
Over time, Google Cloud has used artificial intelligence and open source to carve out a differentiated niche in the cloud market. But to more effectively play catch-up, Pichai said there are three things Google Cloud needs to do: bolster its channel setup, learn the language of enterprise IT to more effectively sell solutions, and ramp its marketing efforts. All of these will help increase what Pichai called Google Cloud’s “mind share” in the enterprise market. That is, more people will think of Google Cloud first rather than throwing them the scraps left after deals with AWS and Microsoft have been struck.
Futuriom founder and chief analyst Scott Raynovich also identified Google Cloud’s enterprise channel scale as its biggest weakness, like Pichai pointing out it’s up against Microsoft, which has been “selling and developing enterprises for decades.”
Raynovich added, “The other part is culture — most of Google’s revenues still come from search ads and YouTube, which are both largely automated. The company has never been set up for large enterprise deals which are more reliant on humans talking to one another.”
AWS had the first-to-market advantage as its first service came out in 2004, noted Patrick Moorhead of Moor Insights and Strategy.
“This was before both Azure and GCP. Microsoft advantage was its giant installed base of Windows servers that it could easily transfer online to Azure,” Moorhead told Silverlinings. “When Google Cloud first came out, it did not have the advantage of an installed base, and it was asking customers to act more like its consumer operations that would be upgraded annually. Enterprises did not like this,” he said, adding “I am very confident in Google Cloud’s leadership at this point. I believe the company will need to make some major acquisitions, on prem acquisitions like a Cloudera to move this forward faster.”
Find out more about the big three hyperscalers. Register for our Cloud Cover virtual event from March 14-15 here.