By Jack Nicas and Jay Greene
Google conquered internet search. It is having a tougher time
winning the rapidly growing cloud-computing industry.
Google is pitching potential corporate customers on its vast
network of computers and artificial-intelligence tools, and often
undercutting the prices of the two incumbents that dwarf it,
cloud-computing pioneer Amazon.com Inc. and corporate-tech veteran
Microsoft Corp.
But to catch those rivals, analysts say Google must build more
credibility among corporations wary of running their businesses on
the servers of an internet-search company with little experience
supporting the technology needs of big companies, other than its
own.
In response, Google has been expanding its sales, marketing and
customer-support staff in an effort to cater to traditional
industries.
But Google Cloud chief Diane Greene says the company's
technology, and not its business fundamentals, will help it
succeed. "The business-side stuff is not rocket science. It is
blocking and tackling," she said. "The part that is rocket science,
that's the part I like coming to the party with."
Google, a unit of Alphabet Inc., plans to tout its progress at
its cloud conference in San Francisco this week and announce new
customers, including global bank HSBC Holdings PLC. HSBC, which
also uses Amazon's cloud service, said it is using Google's
technology to improve its money-laundering detection, run
simulations and make complex calculations.
The shift to cloud computing threatens to displace billions of
dollars of tech spending as companies from corporate giants to hot
startups store their data and run their digital businesses on other
companies' computer servers.
Google faces an uphill battle against Amazon and Microsoft. The
industry juggernaut, Amazon Web Services, earned $12.22 billion in
cloud revenues last year, while Deutsche Bank estimates $2.42
billion for Microsoft's Azure cloud service and $900 million for
Google. Those numbers don't include sales of cloud-based
productivity tools, such as Microsoft's Office 365 and Google's
Gmail and Google Docs.
While both Microsoft and Google are expected to more than double
their cloud sales over the next two years, Microsoft will grow
faster than Google, despite its bigger size, Deutsche Bank
forecasts.
Ms. Greene said Google is gaining traction, winning most of the
time when competing with Amazon or Microsoft for new companies
moving to the cloud.
Amazon and Microsoft rebuff that suggestion. "We rarely see
(Google) among the last two finalists for big deals -- especially
when it comes to larger customers or enterprises," said Ariel
Kelman, vice president of marketing for AWS.
Google is only included in about one in 20 of Microsoft's sales
engagements, said Judson Althoff, Microsoft's executive vice
president of world-wide commercial business. "And when they do,
most customers chose Microsoft."
Google says the race is far from over. It believes its cloud
business could one day eclipse its massive advertising business,
which accounted for 88% of Alphabet's $90 billion in sales last
year. "It is so early," Ms. Greene said. "Ninety-five percent of
the world's data is not in the cloud."
Indeed, analysts and cloud executives, including Ms. Greene,
predict the cloud and related corporate-tech spending could one day
be a $1 trillion market.
Google hired Ms. Greene, a co-founder of enterprise-tech firm
VMware Inc., in late 2015 to show it is serious about the cloud.
The company's cloud business had been geared toward app developers
and tech firms, and some of its biggest clients are still Snap Inc.
and Spotify AB.
Amazon and Microsoft boast deep relationships with large
corporate customers, as well as vast ecosystems of partners that
sell and support their technology. Google needs to convince
corporate customers, app developers and cloud consultants that it
will develop a similar foundation for its cloud business, said Matt
McIlwain, managing director of Madrona Venture Group LLC, a venture
firm that invests in cloud startups.
Mr. McIlwain believes Google trails its rivals in that area, in
part because it hasn't built the same sort of longstanding
relationships with major consulting firms required to land large
corporate customers.
Google is now bolstering its services for traditional companies
by hiring workers specialized in industries such as health care,
finance and retail, to help make Google's cloud products work for
those sectors. Google said it added more cloud employees than any
other division last year, and is in the process of hiring 1,000
employees focused on cloud customers.
Google is also adding partnerships with enterprise-software
firms that have strong toeholds with big corporations so their
software works on Google Cloud, such as SAP SE, which is announcing
its compatibility this week. SAP already works with Amazon's and
Microsoft's cloud offerings.
Ms. Greene said now that Google can handle big companies' needs,
it aims to win customers with its artificial-intelligence and
data-analytics tools.
Analysts say Google's AI tools are top-of-class. For instance,
Airbus SE's satellite-imaging group uses Google's image-recognition
tool to spot and remove clouds from its satellite images. Ocado
Group PLC, a British online grocery firm, uses Google's
voice-recognition and language-processing tools to let software
monitor its customer-service calls to measure customer
sentiment.
But analysts say competing on product isn't enough. "They win
quite often when they get invited to the party but they're not
invited to the party enough," said Dave Bartoletti, principal
analyst at Forrester Research.
--Rachael King contributed to this article.
Write to Jack Nicas at jack.nicas@wsj.com and Jay Greene at
Jay.Greene@wsj.com
(END) Dow Jones Newswires
March 08, 2017 10:14 ET (15:14 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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