It's not as glamorous as virtual reality, but it's a big money-making tech industry.
Cloud infrastructure keeps growing thanks to a period of massive digital transformations occurring for enterprises all over the world.
Benefits include significant cost savings, scalability, increased security, unlimited data storage capacity, reduced environmental impacts, and more, which are qualities that almost every business today wants to take advantage of.
International Data Corporation estimates that compute and storage spending for Cloud infrastructure will expand at a compound annual growth rate (CAGR) of 12.4% between 2020-2025, reaching just short of $120 billion in 2025.
When it comes to the major cloud infrastructure providers, three familiar names are dominant forces.
Microsoft (MSFT) - Get Microsoft Corporation Report and it’s rapidly growing Azure cloud offering holds roughly 21% of global market share, while Alphabet’s (GOOGL) - Get Alphabet Inc. Class A Report Google Cloud comes in third-place and has captured about 8% of global market share as of Q3 2021.
While there’s certainly plenty of room for additional growth from all three of these big-tech companies’ cloud businesses, it’s clear that Alphabet has some work to do in order to disrupt Amazon and Microsoft’s dominance.
Investors should expect heavy cloud investment from the search-engine giant over the next decade, which might lead to strong gains for long-term shareholders.
Let’s take a look at how Alphabet might disrupt Amazon and Microsoft’s cloud dominance.
Doubling Spending on Partner Incentives
One of the ways that companies like Amazon, Microsoft, and Alphabet attract new customers to their cloud services is through partnership programs.
These programs are crucial because they incentivize companies to join, which in turn leads to a bigger partner ecosystem that the cloud vendors can leverage to improve their service offerings.
The team at Google Cloud understands that investing heavily in its Partnership Advantage Program could be a key differentiator which helps the company take market share from competitors, and Alphabet is making some big changes in order to pursue that strategy.
Recently, Google Cloud announced that it is combining its ecosystem and channel sales teams into a single partner organization, along with pledging to spend double on partners over the next two to three years.
Both moves could immediately make Google Cloud more attractive to enterprises all over the world.
First, the consolidation of the Google Cloud organization could allow the company to better leverage its technical expertise and appeal to more companies with specific needs.
Working with the increasingly large global network of Google Cloud partners means a company can collaborate with a team that has the exact industry background and experience to hit the ground running implementing Google’s technologies.
Kevin Ichhpurani, corporate VP of Google Cloud’s ecosystem and channels, was recently interviewed by CRN and mentioned “We’re actually having discussions with clients where all the partners are on the line together to solve this problem. That’s an evolution of the way partnering is happening and why we wanted to bring all partner types together under one roof. We very much see the future of partnerships and the way we’re pursuing them as what we call ‘value networks.’”
It’s also worth noting that Google Cloud partners can benefit from financial perks including discounts, sales promotions, and performance incentives, which will become even more appealing thanks to the company’s commitment towards increasing its spending there.
Expanding Hybrid Cloud Offerings
Another possible way that Alphabet can disrupt Amazon and Microsoft’s position in cloud infrastructure is by expanding its hybrid cloud offerings.
In simple terms, hybrid cloud solutions combine public cloud, private cloud, and physical infrastructure together into one flexible operation.
Companies are interested in hybrid cloud offerings because they often have millions of dollars in on-premises infrastructure like data centers that they need to keep using to comply with data regulatory rules.
Hybrid cloud solutions can also be beneficial as they allow a company to move at its own pace during a digital transformation without business disruptions, improve performance and reduce latency, and can offer more flexibility.
The issue with Alphabet is that the company is still pretty far behind AWS and Azure with its hybrid cloud offerings.
That might be changing soon, as the company recently announced a broad portfolio of hybrid cloud services managed by Anthos, which is the company’s modern application management platform.
Anthos has some benefits including the ability to manage workloads in multi-cloud and hybrid cloud environments, run on existing hardware, and even function in competitors’ clouds, which might help Alphabet to move the needle in the battle for cloud dominance.
Make sure to keep an eye out for Alphabet’s cloud revenue growth when the company reports its Q4 earnings on February 1st, which is becoming increasingly important given all of the capital the company is allocating towards growing this segment.