Locked in an uphill battle against AWS and Microsoft in infrastructure cloud computing, Google Cloud has made the adjustments needed to gain ground, according to CEO Thomas Kurian. Now all it needs to do is navigate its employees, partners and customers through one of the biggest economic shocks in a century.
As at many companies, the COVID-19 pandemic reordered Google Cloud's priorities for 2020. The company was scheduled to hold its annual customer and developer event, Google Cloud Next, in early April, but wound up scrapping the idea of a virtual event amid the chaos of stay-at-home orders.
As the disaster unfolds, Google Cloud has been working with customers to figure out the best way to handle the new normal, Kurian said in an exclusive interview with Protocol. The chief needs of retail clients shifted overnight, from in-store inventory management to digital sales. Health care companies are under obvious stress, and local governments around the world continue to struggle to provide basic services using outdated technology.
Still, life goes on. Google Cloud is growing strongly, but so is the entire market, and leaders AWS and Microsoft have a much larger slice of that market. There's still plenty of opportunity out there as more and more companies realize that modernizing their infrastructure will be the price of doing business in a post-pandemic world, but forever-nerdy Google has struggled to win the trust of the enterprise buyer.
Kurian, a longtime Oracle executive, was brought on in early 2019 to change that. Google Cloud, which includes both its public cloud infrastructure service and G Suite office software, disclosed revenue for the first time in January, saying it brought in $2.6 billion during the fourth quarter. That was a 53% jump compared to the last quarter before Kurian joined the company, but pales next to the $9.9 billion in revenue AWS posted during the fourth quarter.
In our interview, Kurian detailed some of Google Cloud's COVID-19 efforts, addressed concerns about whether Google is in the enterprise market for the long haul, and discussed — carefully — his evolving strategy around mergers and acquisitions. He also pledged that Google would transfer one of its most important open-source projects to the control of a foundation; you can read that story here.
This interview has been lightly edited and condensed for clarity.
How has Google been affected by COVID-19?
The first step we took when COVID hit was to make sure all of our employees and people in our organization were safe. And we also put in place a number of measures, with our cloud technology, to make sure we had sufficient capacity. Our operations teams were monitoring these environments.
We have a protocol we call Black Friday/Cyber Monday, which is designed operationally to provide the highest level of uptime, reliability, etc., for customers. All of those were activated by the great work of our teams. We transitioned our entire employee base to work from home very quickly. So that was phase one.
In phase two, we've been helping organizations around the world to support them, and we've been working very closely with them in their mission. If you're a government, to help your citizens; if you're a health care organization, to deliver health care better; if you're a company or research institute, to use our technology to identify possible ways to either test for COVID or treat COVID. And then for organizations like retail, in order to make sure people around the world have the necessary food supplies and other things, we've helped replace or re-pivot them from stores to online systems.
We've also built social services and what we call economic aid platforms for a number of government agencies. For example, recently there was an article about the work we're doing with New York state, where we're helping them build unemployment insurance and social benefits distribution platforms so that people can continue to receive medical and financial benefits. We've done work with the state of Oklahoma to help them build a more effective way to identify people with the disease and be able to direct them appropriately.
Imagine you're a doctor who's talking to a patient and trying to deliver care remotely. The important things that we offer are not just conferencing tools, but also through our Google Cloud Platform and the health care solutions we have in it, the ability for a doctor to be able to easily collect information about the patient and their symptoms, and then to put that into their medical record, so that they can monitor the patient over time.
We've got solutions to help people do research on potential cures or vaccination treatments. We are working with a number of health organizations and government agencies that are doing trials using a platform for genetic patterns and various other kinds of disease solutions. Lastly, we've also worked with a number of organizations to identify what's the best place for patients to get treatment, and to make sure that medical equipment, which as you know is still scarce, is in the right place where they're seeing spikes in the disease.
Have you noticed significant shifts in the way people are using GCP, different spikes in demand?
We generally see three classes of industries. There are industries that have been significantly affected in the short term: travel, hospitality, parks, things that require people to have physical presence.
And in those industries, we've helped a number of them while they are going through financial difficulties. Several of the stronger ones are looking at, "How do I fundamentally re-platform to come out of this period?" Data centers, for example, they have fixed amortization costs associated with depreciation in the data center. And so even if they're in a downturn, they're unable to reduce that expense burn.
So a number of them have talked about accelerating this shift to the cloud. Some of them are also talking to us about modernizing their infrastructure estate during the period because there's lower traffic on the systems and therefore it's easier to make changes to it.
The second category is the examples I gave you [above], organizations that are seeing big spikes because of requirements from customer segments or citizens on their platform.
The third segment is coming from organizations that have not begun to see a spike, but are preparing for that. Like financial institutions, they are preparing for large spikes in the PPP program. And there are lots of financial institutions, insurance companies, banks that are preparing for that next phase, if you will, that happens right after the initial phase of the pandemic going through.
They are preparing because they, on a normal steady stage, have a certain number of loan officers that process loans. Suddenly, you're seeing a huge spike in loans coming in. And you need technology to be able to process that in a cost-effective and time-effective manner.
Google has a reputation for closing down services that it believes aren't being used in sufficient numbers. Among people I talk to, that sometimes raises a red flag when it comes to working with Google. As you work with these new customers who are in really, really severe difficulty right now, what kind of assurances are you giving them that, as they bet on these services from you, you'll be there over the long haul?
Our cloud services are offered under a standard support agreement. For cloud services publicly, for example, all the GCP services are exactly the same as those from our competitors. So we give them assurances that we won't deprecate a service without the proper notice period, and the notice periods are exactly the same as competitors.
Do you hear that feedback, though, from customers when you talk to them?
When I joined? Yes.
But we've made up. As early as June last year, when John Jester joined our organization to take over our customer experiences, that's one of the things we felt we had to be proactive about, and we did. We've also been very clear — and shared through our sales teams — a product roadmap, so they understand what we're working on and that they have influence on the product roadmap. In addition to the support statement and the support agreements we have, it also gives them confidence in where we're taking the product.
I'm sure you're aware of a report that came out last year about Google having a 2023 deadline for making sure GCP was first or second in the market. Can you comment on that deadline? Does it exist? And has that changed in the wake of all this pandemic stuff?
That report was factually not true. I probably don't have anything more to say about it.
Which part of it was factually not true?
All of it.
Given the situation at the moment, do you anticipate accelerating M&A activity over this period of time? I know that's something you've been focused on over the last year.
We've always been thoughtful about growing our business with organic products that we are building ourselves. We are, as you know, integrating Looker, an acquisition that we made in the analytic space, into our organization, and we're not rushing out to buy companies.
Nor are we saying, I don't think M&A makes sense. When and where it makes sense, we will jump in and decide, at the right time, to make acquisitions.
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This is a little dark, but it seems like it's going to be a good shopping opportunity. There's going to be a lot of companies that don't come through this, or don't come through this at the same level that they were at six months ago.
Over the last year, if you look at what we've said repeatedly, yes, we need a very clear, crisp product strategy. I think the feedback we've received from customers, from partners has shown that we have now clarified our product strategy. So if we were to do acquisitions, they know how it complements our footprint.
We've also scaled our go-to-market organization significantly, with credit to Rob Enslin and his team. They've done a great job and to be honest with you, a lot of examples of customers I gave you [above] were illustrative of the reach that we now have through our customer service and sales organization to help customers through this.
We continue to work with partners to bring them business. One of the things that we've always felt is that the best partnerships are tested during a difficult period, and we remain committed to bringing as much business as we can to the partner community.
As a result, we are seeing great support from the partners that we work with: Almost all the examples I gave you were projects we've done along with partners to deliver joint solutions to customers. And we remain committed to that.
As I said, we're not ruling in or out any acquisition discussion. We don't need acquisitions to grow; you've seen our growth rates. Nor are we saying we won't do anything, because it would not make sense to make such a public statement.
