Why Google buying Salesforce would make sense
Rumours emerged last week of the tech titan considering a move for the CRM giant to bolster its cloud business. CRN asks whether a move would be logical for Google
Thomas Kurian has just completed his first 12 months heading up Google Cloud, a year that has seen the cloud provider at its most active, and culminated in rumours that it's about to undertake the biggest acquisition in tech history.
Speculation is rife that the vendor is interested in buying CRM behemoth Salesforce based on recent predictions by equity research firm RBC Capital Markets, reported Business Insider.
The research house predicted that Google could shell out up to $250bn (£191bn) for Salesforce, which currently has a market capitalisation of $70bn.
Google's parent company Alphabet was recently valued at $1tn and generated an overall revenue of $40.5bn in its last quarter, so it presumably has the cash to back up an acquisition of this size.
Kurian's replacing Diane Greene was a calculated move by Google to ramp up its four per cent share of the cloud market against leaders Amazon Web Services (AWS) and Microsoft Azure, which currently hold 40 per cent and 15.5 per cent of the market, according to Gartner.
In his first public speech as chief exec of the cloud provider, last February Kurian promised that the company would "compete more aggressively" in the space, and it is fair to say he lived up to that pledge, perhaps even exceeding expectations in some areas.
Last year saw Google Cloud recruit some top names from Cisco and Microsoft, along with the launch of its hybrid cloud Anthos offering and a commitment from parent company Alphabet's CEO Sundar Pichai to invest in its channel.
This year started with rumours of what could be Google Cloud's biggest move yet, and one that could redefine the cloud market space - acquiring CRM behemoth Salesforce.
"This is not the first time we've heard the rumours. There's an element of possible clickbait here, but you can kind of see it happening," one Google Cloud partner, who wished to remain anonymous, told CRN.
The source added that any potential merger between two such large entities would be an arduous undertaking.
"It would be a good mindshare win, and a route into many companies Google doesn't currently have a footprint in," they continued.
"It competes now, but it's a long way off in terms of scale currently - and Google doesn't like being third. It is continuing to hire a load of people and be more aggressive than before, but it's really hard to catch AWS and Microsoft as they're both growing hard too."
Alastair Edwards, analyst at Canalys, said that the speculation originates from Google Cloud being quite vocal about its ambitions to grow its market share substantially, acknowledging that though it is gathering steam in the cloud market, it is still being left in the dust by AWS and Microsoft, with the latter also growing at velocity.
"It is very actively pushing into the partner space; it recognises that channel partners, systems integrators and service providers are critical to giving it the credibility and reach that it needs to even hope to start to ramp up its share in the market, but that's not enough," he said.
"The corporate goal is to make Google a much more sizable contender in the cloud space and to give it much greater scale and reach, and I don't think it can realistically do that without making some kind of acquisition."
Three-year deadline
Late last year, The Informant reported that Google senior management had thrown down the gauntlet to its cloud arm to overtake either Microsoft or AWS, or risk losing its funding. How long has Google Cloud been given to achieve this Herculean task? Three years.
The idea that a company can grow from a four per cent market share to potentially over 50 per cent in three years is not impossible, but in the nascent cloud market, Google is fighting an uphill battle to gain ground on the still-growing Microsoft and AWS.
This brings a bit more logic to the Salesforce rumours, which if proved true, would help it make a dent in the lucrative enterprise market ,where Microsoft has recently won a number of big contracts.
"Google's biggest challenge is in the enterprise, so the only way it can really hope to gain significant scale and share is by owning a bigger share of that market," explained Edwards.
"Salesforce would bring it a sizable platform-as-a-service (PaaS) presence and a significant software-as-a-service (SaaS) presence.
"It would bring Google a huge number of enterprise customers and would give it that footprint in the enterprise that would allow it to expand their reach across a range of areas.
"There are other options that it could take, but what I don't doubt is that, internally, Google is assessing every potential serious acquisition target to get it there."
Acquiring Salesforce's technology would bolster Google's enterprise application capabilities, its cloud platform and its G-Suite portfolio, which would bring it into more direct competition with Microsoft's Azure offering and make the battle for second place in the cloud market more cutthroat.
Salesforce is the most notable name on RBC's list of potential acquisitions, but it's not the only one, with Business Insider reporting the analyst as also predicting that Nutanix could be picked up by Google Cloud to boost its hybrid cloud efforts while simultaneously giving it an inroad into the coveted enterprise space.
Edwards noted that acquiring a company like Nutanix or NetApp would bring Google the differentiation it needs in the cloud market (as well as being significantly cheaper purchases compared with Salesforce).
"Google is going to play effectively not just by being a cloud provider, ie infrastructure-as-a-service provider to enterprise customers. It needs to find a way to create differentiation in what it's doing to allow enterprise customers to extend onto its cloud platforms," he said.
"Any company in that enterprise infrastructure space, ideally with a software-defined proposition or differentiator, would be one potential [for acquisition]."
Kurian Googling
Kurian's first year as chief exec has been the company's busiest in terms of activity and he has not been shy on sharing his thoughts about playing third fiddle to its biggest competitors.
His background and experience at Oracle give Google the corporate reputation and direction that it perhaps lacked under Diane Greene's leadership. It certainly seems a lot more focused, ambitious and partner-orientated than it did prior to Kurian taking the wheel.
Despite the progress made under Kurian's care, Google Cloud still "lacks maturity", according to analyst Edwards, who said that a number of partners have told him that they prioritise working with Google Cloud over its competitors because it has more of a "unique identity" and is "less arrogant" than some of its peers.
"I think the only danger is that as it expands and invests heavily in enterprise resources, it creates the potential for conflict with partners," he stated.
"My impression is it's aware of that and it wants to make sure that its sales and channel organisations are heavily integrated and that partners are part of the design and strategy of the business."
It has been suggested by partners and channel insiders over the years that the best strategy for Google would be to carve out a niche for itself in cloud services and dominate that space instead of trying to compete and play catch-up with Microsoft and AWS.
A potential Salesforce acquisition would mean that Google has not given up on its goals to be a considerable presence in the market, though this could have an impact on its channel, Edwards warned.
"A Salesforce acquisition might make sense to some, but I think for many partners who are choosing now to invest around Google, they want Google to represent the same differentiation that they can bring to it," he explained.
"They're making the choice to invest with Google, ahead of the other two, because they see that this is an area where they can create their own niche and create some differentiated value for the customers which will be lost if Google is just trying to go for scale and size.
"This is going to be a crossroads for Google Cloud. I think in the next 12 months, it will have to make a decision and I think it's very likely that something will happen in terms of acquiring a major company."