Photographer: Simon Dawson/Bloomberg via Getty Images

Google Helped Invent the Cloud, But It’s Still Playing Catch-Up

The company is building data centers and recognizing mistakes.

Google pretty much invented the technology behind the cloud. Its cloud software’s AI and data analysis remain far beyond Amazon.com’s or Microsoft’s. A little surreal, then, that on March 23 Chairman Eric Schmidt had to stand on a stage in front of thousands of cloud developers and lecture them for 20 minutes about the strengths of Google’s internal software and why its products deserve another look.

While Google created many of the cloud’s fundamental software and data-analysis tools as early as the 1990s, Amazon was the first to commercialize them a decade ago, with Amazon Web Services. Two years later, Google’s sluggish response, the Google App Engine, forced clients to let it directly manage their use of computing resources instead of allowing them to rent a certain amount of space or power. (Snapchat is App Engine’s only big mainstream customer.)

“There was something fundamentally wrong with my conception,” Schmidt acknowledged in his March 23 remarks, during Google’s annual cloud conference in San Francisco. “We didn’t give the right steppingstone.”

Diane Greene
Diane Greene
Photographer: Damien Maloney/The New York Times via Redux

Last year, Google made $500 million of its $80 billion in revenue from the cloud, Morgan Stanley estimates, compared with $1.1 billion in cloud revenue for Microsoft and close to $8 billion for Amazon. Researcher Gartner says the $20 billion business-cloud market could grow as much as 35 percent over the next year. In November, Google hired Diane Greene, one of its directors, to grab a bigger piece of that market. “The plan is to take all the unbelievable core strengths that Google has and fill in the gaps in how we communicate about it and deliver it,” Greene says.

Google Compute Engine, announced in 2012, looks a lot more like Amazon’s service. Google has been slow, however, to push it to potential clients. Greene, who spent a decade as the founding chief executive officer of cloud pioneer VMware, says that’s changing: She’s recruiting more marketing and sales staff, including a chief marketing officer. A person familiar with the matter says the West Coast cloud sales team has roughly doubled, to 50 people. Schmidt said on March 23 that thousands of employees will be building Google cloud tools over the next few years.

More grandly, on March 22 Google said it plans to open 12 new cloud “regions” around the world in the next 18 months, each consisting of at least one data center. Currently, Google has four; this would bring its reach roughly in line with Amazon, which has 12 such data centers operating and five more planned. To seriously compete, Google needs at least that many, says Gartner analyst Lydia Leong.

Google is working to build more of the features businesses demand into its cloud, particularly back-end stuff like regulatory compliance monitors and advanced privacy settings. Greene says her next upgrades will focus on machine learning and data analysis, including speech-transcription and image-tagging systems developers can rent.

“Two years ago, the hard problem was: How do I store all this data without going broke?” says Greg DeMichillie, who runs cloud product management for Greene. “The question now is: How do I find these needles in all these thousands of haystacks of data?”

It’s a problem Greene is familiar with from VMware, where she helped develop and sell its virtualization software, allowing one computer to do the job of many. Former lieutenants at VMware say Greene’s technical acumen was superlative, and she’d often correspond directly with rank-and-file engineers about their products. She led the company through its sale to EMC and a subsequent initial public offering in 2007. (She was fired a year later by tempestuous EMC CEO Joe Tucci. The next day, VMware shares lost close to a quarter of their value.) More recently, Greene founded the secretive business-software startup Bebop, which Google bought late last year for $380 million.

Google will need to make a sustained effort to prove to businesses that its cloud products are the equal of Amazon’s or Microsoft’s, says Carl Brooks, an analyst with market researcher 451 Group. “They are alien technology compared to the way most enterprises run data centers,” he says. For all the company’s innovation, it hasn’t focused enough on selling customers the things they want. “They are probably the most advanced cloud operation on the planet,” Brooks says. “It also doesn’t matter.”

The bottom line: Google cloud chief Diane Greene is quadrupling data centers and adding features to better compete with Amazon and Microsoft.

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