- One of the company’s initial forays into AI and machine learning was its $600M acquisition of AI startup DeepMind in January 2014.
- Google has launched two funds dedicated solely to AI: Gradient Ventures and the Google Assistant Investment Program, both of which are accepting pitches from AI and machine learning startups today.
- On its Q4’17 earnings call, the company announced that its cloud business is now bringing in $1B per quarter. The number of cloud deals worth $1M+ that Google has sold more than tripled between 2016 and 2017.
- Google’s M&A strategy is concentrating on strengthening their cloud business to better compete against Amazon AWS and Microsoft Azure.
These and many other fascinating insights are from CB Insight’s report, Google Strategy Teardown (PDF, 49 pp., opt-in). The report explores how Alphabet, Google’s parent company is relying on Artificial Intelligence (AI) and machine learning to capture new streams of revenue in enterprise cloud computing and services. Also, the report looks at how Alphabet can combine search, AI, and machine learning to revolutionize logistics, healthcare, and transportation. It’s a thorough teardown of Google’s potential acquisitions, strategic investments, and partnerships needed to maintain search dominance while driving revenue from new markets.
Key takeaways from the report include the following:
- Google needs new AI- and machine learning-driven businesses that have lower Total Acquisition Costs (TAC) to offset the rising acquisition costs of their ad and search businesses. CB Insights found Google is experiencing rising TAC in their core ad and search businesses. With the strategic shift to mobile, Google will see TAC escalate even further. Their greatest potential for growth is infusing greater contextual intelligence and knowledge across the entire series of companies that comprise Alphabet, shown in the graphic below.
- Google has launched two funds dedicated solely to AI: Gradient Ventures and the Google Assistant Investment Program, both of which are accepting pitches from AI and machine learning startups today. Gradient Ventures is an ROI fund focused on supporting the most talented founders building AI-powered companies. Former tech founders are leading Gradient Ventures, assisting in turning ideas into companies. Gradient Venture’s portfolio is shown below:
- In 2017 Google outspent Microsoft, Apple, and Facebook on R&D spending with the majority being on AI and machine learning. Amazon dominates R&D spending across the top five tech companies investments in R&D in 2017 with $22.6B. Facebook leads in percent of total sales invested in R&D with 19.1%.
- Google AI led the development of Google’s highly popular open source machine software library and framework Tensor Flow and is home to the Google Brain team. Google’s approach to primary research in the fields of AI, machine learning, and deep learning is leading to a prolific amount of research being produced and published. Here’s the search engine for their publication database, which includes many fascinating studies for review. Part of Google Brain’s role is to work with other Alphabet subsidiaries to support and lead their AI and machine learning product initiatives. An example of this CB Insights mentions in the report is how Google Brain collaborated with autonomous driving division Waymo, where it has helped apply deep neural nets to vehicles’ pedestrian detection The team has also been successful in increasing the number of AI and machine learning patents, as CB Insight’s analysis below shows:
- Mentions of AI and machine learning are soaring on Google quarterly earnings calls, signaling senior management’s prioritizing these areas as growth fuel. CB Insights has an Insights Trends tool that is designed to analyze unstructured text and find linguistics-based associations, models and statistical insights from them. Analyzing Google earnings calls transcripts found AI and machine learning mentions are soaring during the last call.
- Google’s M&A strategy is concentrating on strengthening their cloud business to better compete against Amazon AWS and Microsoft Azure. Google acquired Xively in Q1 of this year followed by Cask Data and Velostrata in Q2. Google needs to continue acquiring cloud-based companies who can accelerate more customer wins in the enterprise and mid-tier, two areas Amazon AWS and Microsoft Azure have strong momentum today.
- 50% of IT professionals believe artificial intelligence and machine learning are playing a role in cloud computing adoption today, growing to 67% by 2020.
These insights and findings are from LogicMonitor’s Cloud Vision 2020: The Future of the Cloud Study (PDF, free, opt-in, 9 pp.). The survey is based on interviews with approximately 300 influencers LogicMonitor interviewed in November 2017. Respondents include Amazon Web Services AWS re:Invent 2017 attendees, industry analysts, media, consultants and vendor strategists. The study’s primary goal is to explore the landscape for cloud services in 2020. While the study’s findings are not statistically significant, they do provide a fascinating glimpse into current and future enterprise cloud computing strategies.
Key takeaways include the following:
- 83% Of Enterprise Workloads Will Be In The Cloud By 2020. LogicMonitor’s survey is predicting that 41% of enterprise workloads will be run on public cloud platforms (Amazon AWS, Google Cloud Platform, IBM Cloud, Microsoft Azure and others) by 2020. An additional 20% are predicted to be private-cloud-based followed by another 22% running on hybrid cloud platforms by 2020. On-premise workloads are predicted to shrink from 37% today to 27% of all workloads by 2020.
- Digitally transforming enterprises (63%) is the leading factor driving greater public cloud engagement or adoption followed by the pursuit of IT agility (62%). LogicMonitor’s survey found that the many challenges enterprises face in digitally transforming their business models are the leading contributing factor to cloud computing adoption. Attaining IT agility (62%), excelling at DevOps (58%), mobility (55%), Artificial Intelligence (AI) and Machine Learning (50%) and the Internet of Things (IoT) adoption (45%) are the top six factors driving cloud adoption today. Artifical Intelligence (AI) and Machine Learning are predicted to be the leading factors driving greater cloud computing adoption by 2020.
- 66% of IT professionals say security is their greatest concern in adopting an enterprise cloud computing strategy. Cloud platform and service providers will go on a buying spree in 2018 to strengthen and harden their platforms in this area. Verizon (NYSE:VZ) acquiring Niddel this week is just the beginning. Niddel’s Magnet software is a machine learning-based threat-hunting system that will be integrated into Verizon’s enterprise-class cloud services and systems. Additional concerns include attaining governance and compliance goals on cloud-based platforms (60%), overcoming the challenges of having staff that lacks cloud experience (58%), Privacy (57%) and vendor lock-in (47%).
- Just 27% of respondents predict that by 2022, 95% of all workloads will run in the cloud. One in five respondents believes it will take ten years to reach that level of workload migration. 13% of respondents don’t see this level of workload shift ever occurring. Based on conversations with CIOs and CEOs in manufacturing and financial services industries there will be a mix of workloads between on-premise and cloud for the foreseeable future. C-level executives evaluate shifting workloads based on each systems’ contribution to new business models, cost, and revenue goals in addition to accelerating time-to-market.
- Microsoft Azure and Google Cloud Platform are predicted to gain market share versus Amazon AWS in the next three years, with AWS staying the clear market leader. The study found 42% of respondents are predicting Microsoft Azure will gain more market share by 2020. Google Cloud Platform is predicted to also gain ground according to 35% of the respondent base. AWS is predicted to extend its market dominance with 52% market share by 2020.
- During the 2Q16 call, Google called out Cloud as the primary driver of the re-accelerating growth for Licensing and Other revenue, the first time the business has been called out in pole position.
- Recent Orbitera and Apigee acquisitions underscore Google’s new focus and aggressiveness to grow GCP. Google has spent $1B+ on Cloud M&A over the past 12 months.
- Deutsche Bank predicts GCP is preparing a series of new product announcements in September to strengthen their customer-facing roadmap further.
These and other insights are from Deutsche Bank Markets Research study, Google Getting More Aggressive In The Cloud, (client access) published 8 September 2016 by Ross Sandler Karl Keirstead, Deepak Mathivanan, Aki Aggarwal and Taylor McGinnis. Deutsche Bank found that Google is investing heavier in the cloud, making a financial commitment with over $1B in acquisitions in the past year including the recent Apigee deal. The study is based on interviews Deutsche Bank contacted with channel partners, prospects, partners, and customers. Despite the renewed focus on growth, Deutsche Bank predicts that GCP would continue to trail AWS and Microsoft Azure for the foreseeable future.
Key takeaways of the Deutsche Bank Markets Research survey include the following:
- Deutsche Bank defines the Total Available Market (TAM) enterprise IT spend in nine categories that together account for over a $1T TAM. Deutsche Bank defines the Enterprise IT spending market by combining storage, network equipment, infrastructure software, IT outsourcing and support, data management software, BI/analytics, application software and consulting Deutsche Bank sees AWS make significant progress across a wide spectrum of their taxonomy categories.
- GCP new product launches are concentrating on machine learning, data analytics and security, including data encryption and identity and access management. Google’s aggressiveness regarding the cloud is most visible from their new service announcements shown in the table below. Recent announcements include SQL Server Images, where customers can now natively spin up Microsoft database instances on GCP, akin to AWS RDS for SQL Server. GCP also announced a second generation version of Cloud SQL, its cloud-hosted alternative to MySQL and AWS Aurora. While all of these announcements provide GCP with greater potential to compete against AWS and Microsoft Azure, Google’s two larger competitors have formidable momentum in enterprises.
- Aggressive build-out of global infrastructure locations continues. Google announced during their 4Q15 earnings call they would build 12 new regions in 2016 and 2017. Of the 12 new planned GCP regions, the US Western region in Oregon opened in July 2016, and Google has said that the new Tokyo region will be available later this year, leaving ten more regions to be added in 2017.
- Google continues to believe in the importance of machine learning and artificial intelligence. Deutsche Bank interviews with GCP customers confirmed interest in using machine learning and artificial intelligence on the Cloud. Customers also perceive GCP is well ahead of AWS and Azure in this regard.
- Google is quickly hiring enterprise sales reps in an attempt to close the sales gap between themselves and AWS & Microsoft Azure. Deutsche Bank found that Google has been “hiring very aggressively” to scale its enterprise sales rep capacity and also retrofitting existing sales reps from elsewhere in Google into GCP.
- GCP is gaining share rapidly within the startup community. Deutsche Bank spoke with customers who estimated that 25% startups are using GCP today (with 75% on AWS), while another estimated the ratio to be 20%/80%. While both agreed that a couple of years ago only 10% of startups were using GCP (with 90% using AWS). During the GCP NEXT Asia-Pacific keynote earlier this month Google disclosed that Snapchat “is one of our largest customers,” making up to 2 million queries per second and consuming more Google bandwidth than any other organization except for YouTube.
- Recent Orbitera and Apigee acquisitions underscore Google’s new focus and aggressiveness to grow GCP. Last month Google acquired Orbitera, a small cloud commerce platform. Orbitera simplifies the buying and selling of cloud-based software by providing vendors with packaging and provisioning, billing, and marketplace solutions on AWS and Azure. Earlier this month Google acquired Apigee for $625M, which is 5.2x Apigee’s FY17e revenues of $120M. Apigee is expected to grow by 30%-35% in The company focuses on larger enterprises (Walgreens, Nike, Target, AT&T) and despite an ongoing mix shift to the cloud or SaaS model, it still has a legacy on-premise license/maintenance business.
- Google is very focused on building relationships with all systems integration (SI) firms but that building out a GCP channel is proving to be challenging. Deutsche Bank believes that Microsoft is also finding it tough to build out it’s Azure channel, in part because many traditional partners and resellers struggle with how they can monetize Azure, given its different price points and the lower services attach rate