James Governor's Monkchips

Google’s potential for upside

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I attended Google NEXT London last week, and I have already written a couple of related posts, but I wanted to note something else that, while it is kind of obvious, is also kind of amazing. I have been skeptical of Google’s decision to bring G Suite and Google Cloud Platform into one business. Cloud infrastructure and office productivity are very different markets.

Matt McNeil, who runs GCP in UK and Ireland, kept referring to G Suite customers’ Transformation Agenda in our briefing last week. Forgive me if I can’t really get excited about an organization adopting cloud-based office productivity products – it’s 2017! I am more interested in Digital Transformation, fundamentally resetting an organisation’s attitude to IT as competitive advantage, reshoring and rethinking application development, skills and tools. I more interested in Data Transformation where an organization fundamentally rethinks how to take advantage of data assets to build data moats for competitive advantage. I am more interested in a transformation to a culture of practitioner-led disruption. The kind of transformation that requires Engineer to Engineer engagement between web scale companies and enterprises.

And yet.

I know some organisations – Jaguar Land Rover for example – started with G Suite (then called Google Docs) and then adopted Google Cloud Platform, so the pattern can make sense. But Google needed to rethink its go to market and account strategies in order to make cross-selling not just a happy accident, but something programmatic. G Suite is of course very widely deployed, across hundreds of thousands of organisations (Google says millions but I can’t quite my head around that).

Consider that today only 6% of G Suite customers currently run GCP.

Potentially even more interesting is the Adwords opportunity. Google has a direct relationship with the world’s biggest marketing orgs – Google is the biggest item on the balance sheet of many CMOs.

And again, the overlap is minimal. Only 5% of Adwords customers currently use GCP.

The CMO sale is an interesting one because of the growing importance of big data and tech in marketing. While Amazon, Salesforce, Oracle and IBM have all made explicit plays for the CMO, But Google has a gargantuan presence in marketing organisations. With real chops in AI, ML, and mobile it can potentially point GCP at the office of the CMO, not just the CIO. There is after all currently a major shift in budget going on, with marketing becoming a significant IT buyer in its own right.

While there are significant caveats in the 5% and 6% overlap figures – small businesses are obviously not a target for direct sales, even if we chop off a big part of the long tail, the upsell opportunity is real and significant.

GCP has set up a new account structure to address its top 3000 accounts. Major accounts will be served by a three-strong team or “pod” comprised of a field sales rep, customer engineer, and inside sales and support. While not rocket science, Google has a lot of opportunity available in its engagement model because until recently it was doing little if any of the basic blocking and tackling you’d expect from an enterprise IT company. Like customer service for example, and issue escalation. It is investing heavily now in pre-sales, professional services and support.

Google is a long way behind Amazon Web Services – that goes without saying. Microsoft is already set up with the right kind of enterprise service infrastructure to win corporate workloads on Azure. But Google does have great franchises it has until now not cross-leveraged, and that’s where the potential upside gets interesting. Google’s 2016 revenues were just shy of $90bn. It has been taking more and more of its ad sales direct. GCP could be the next act in this play.

It may be that the naysayers are right, and that we’ve already hit Peak Google. But Ben Thompson of Stratechery has been surprised by Google’s strength in mobile advertising – as he says Google crushed it even more than normal in the first quarter.

Youtube remains an incredibly sticky platform, gaining committed new users in the post-millennial demographic. A post that argues Google will collapse that doesn’t use the term “Youtuber” is almost certainly missing something important.

I would also generally recommend looking to history when making projections of future failure. Tech companies with great franchises have been challenged before. Some – such as Digital or Sun Microsystems – have indeed collapsed, while others, notably IBM and Microsoft, have not.

Google’s ad revenue in 2017 is expected to grow an additional 16%. That is staggering.

There are so many basic things Google can do, blocking and tackling, flossing and brushing, eating its greens, being humble, that will serve to drive up its GCP revenues.  The cross sell can work. Of course execution will be everything, but at this point it would be absurd to count Google out as a major cloud player driving billions of dollars in revenue.



Google is a client. Amazon and Microsoft are both clients.

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