Google announced last week that it is doubling their office space near Seattle, few miles away from Amazon. Google sees cloud services as the next source of profit and providing clients access to its sophisticated computing services. So what are the stakes and how does the ecosystem looks like?
What is at stake?
According to analysts, Amazon Web Services (A.W.S.), by far the leader in cloud services, earned $800 million last year. Having initially focussed on startups, also large companies see startups and small businesses as a massive attractive market, they are now also getting more attractive to mainstream companies like Netflix, Samsung and InterContinental Hotels Group.
According to Gartner, the public cloud services market is forecast to grow 18.5 percent in 2013 to total $131 billion worldwide, up from $111 billion in 2012, Infrastructure as a service (IaaS), including cloud compute, storage and print services, continued as the fastest-growing segment of the market, growing 42.4 percent in 2012 to $6.1 billion and expected to grow 47.3 percent in 2013 to $9 billion.
Research director at Gartner, Ed Anderson said:
“The continued growth of the cloud services market will result from the adoption of cloud services for production systems and workloads, in addition to the development and testing scenarios that have led as the most prominent use case for public cloud services to date. Evidence of this growth is found in the increasing demand for cloud services from end-user organizations, met by an increased supply of cloud services from suppliers.”
Ecosystem
As rightly put by the NY Times, “most of the apps that run on Google Android phones, for instance, are built using Amazon’s cloud, and Google would like to wrest back control. Microsoft, Amazon and Google are all competing to host online video, a booming business that relies on cloud services.”
So it’s also about controlling the ecosystem, in this case Android, but also to look forward at emerging trends such as online video which will become a huge part of internet traffic. Google already has Youtube, which also happens to be the second largest search engine after Google Search. Being able to offer parts of the chain is interesting because it grows more and more to a one-stop-shop.
This is exactly where Amazon is now having advantage, according to James Staten, Forrester Research analyst:
“Almost every major consultancy supports Amazon; almost every advertising agency runs on Amazon; if I need to hire 10 people tomorrow to help me build my application, it’s super easy to find people who have Amazon experience.”
The one-stop-shop aspect will become –in cloud services- be more of a compelling differentiator. How annoying is it to have your files on Amazon, apps on Google, photos on iCloud etc. I think there’s a need for players that are able to offer the complete package to their target audience.
Google’s cloud developments:
2004, Google introduced Google App Engine, letting clients build and host web and mobile apps on its Cloud.
2012, Google announced Computing Engine, enabling large-scale computing and data center access, but nearly a year later and it is not yet open to public.
Pricing war
According to the NYTimes, “people who have used Google’s cloud business say it is inexpensive and capable, but lacks some features of A.W.S. Google has said its cloud services will cost about 50 percent less than competing products.”
I think the one-stop-shop can be very interesting, trying to stay away from price competition. As Joe Pine, ‘father’ of the experience economy, once said in a Dutch article, if you need discount (and therefore pricing as the primary competitive advantage, there’s something wrong with your product. Add great service to the one-stop-shop and there might be chances there.
What do you think of Google’s cloud adventure?
Gianluigi Cuccureddu is co-founder of Damarque, helping you to improve your commercial performance through better engagement with your employees, customers and strategic business partners.
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