Google's cloud move sharpens rivalry with Amazon, Microsoft

In a major move to gain momentum in the growing cloud computing business, Google has named VMware co-founder and tech industry veteran Diane Greene as chief of that business, reports USA Today.

According the news portal, Google Chief Executive Sundar Pichai made the announcement Thursday in a blog post.

"Only a tiny fraction of the world's data is currently in the cloud — most businesses and applications aren't cloud-based yet," Pichai said. "This is an important and fast-growing area for Google and we're investing in the future."

Google is buying Greene's start-up Bebop Technologies, which helps make it easier to build and maintain enterprise applications. Greene, the former VMware chief executive who sits on the board of directors of Google parent company Alphabet, will bring her Bebop team to Google to join in the effort to take market share from cloud leader Amazon. Google is consolidating its cloud businesses into a single group that Greene will lead.

"Cloud computing is revolutionizing the way people live and work, and there is no better person to lead this important area," Pichai was quoted as saying according to USA Today/

Google isn't just facing stiff competition from Amazon, which is the leader in cloud services. Microsoft is looking to ramp up its cloud computing business and IBM is also a formidable player.

Google goes after market leaders

"This is a salvo across the bow of every competitor that Google is serious as they move forward into this new frontier, focusing their resources on taking advantage of the huge market opportunity that cloud offers," Forrester Research analyst Rob Stroud said.

"Right now Amazon is the clear leader. We have also seen Microsoft Azure in the last period start to do well and growing market share and of course you have IBM very engaged in the market as well and being successful," Stroud said. "Google is after those three market leaders for sure right now. They have the cash to compete but more important...they have the household name."

Google will have to differentiate itself from Amazon and other rivals, Stroud said, but will have an entree to major corporations through its apps business, which counts Fortune 500 companies as customers.

Urs Hölzle, Google's senior vice president of infrastructure, said this week at a tech conference that the company's cloud revenues could surpass advertising revenue in five years.

"The goal is for us to talk about Google as a cloud company by 2020," Hölzle said on stage at the Structure conference in San Francisco.

Amazon dominance

Cloud services has become a gilded lining for Amazon. The Internet giant for years has struggled with profitability as a retailer. But Amazon Web Services mints money. Amazon Web Services division reported third-quarter revenue of $2.08 billion and $521 million in profit. That was a 78% jump in revenue and a 432% jump in profit over the same quarter a year earlier, reports USA Today.

Microsoft also got a big boost from booming demand for its cloud products in the third quarter. Chief Executive Satya Nadella has shifted Microsoft's focus to software and cloud services as demand for the Windows operating system has slowed.

"Cloud continues to be the Rock of Gibraltar for Microsoft," Daniel Ives of FBR Capital Markets said after Microsoft reported third-quarter results.

Advertising generates nearly 90% of revenue for Alphabet. Cloud and other businesses are categorized as "other" revenue.

The appointment of Greene "certainly suggests Google is taking its cloud opportunity extremely seriously, and that it wants to create something that's truly enterprise-grade," said Jan Dawson, chief analyst with Jackdaw Research. "The next big question is whether Google will start to report more detail about its cloud and enterprise businesses going forward — both Amazon and Microsoft have provided a lot more transparency over their respective cloud businesses in the last few months, but Google has stayed more or less silent on the scale and performance of its cloud business."