Google Cloud's swell of big, longer-term deals are a sign that customers trust it won't kill off its cloud products
- Google Cloud has been signing big, longer-term deals with large enterprises.
- This shows Google Cloud building customer trust as it competes with Amazon and Microsoft, one analyst told Insider.
- Google is infamous for killing off products just a few years after launch.
- See more stories on Insider’s business page.
Google’s reputation for killing off its products has spawned jokes and dedicated websites, with Google Reader and Google+ as memorable examples, as well as recent casualties like Play Music, App Maker, the Internet balloon project Loon, and chat app Google Hangouts.
That capricious reputation has shaken the confidence of potential customers, but there are recent signs that Google Cloud has convinced the market that it’s determined to do things differently, as evidenced by recent big, longer-term deals.
Google announced in its earnings on Wednesday that Google Cloud grew 46% year-over-year to generate $4 billion in revenue in the first quarter, thanks in part to big, multi-year contracts with companies like Global Payments and Brazil’s largest media company, Grupo Globo. The seven-year deal with Grupo Globo is its biggest deal yet in Latin America.
While Google has certainly scored giant customers in the past — with Goldman Sachs and Target as two examples — Nick McQuire, chief of enterprise research at CCS Insight, said that he’s noticed a swell of new, longer-term contracts that he sees as a sign that Google Cloud is increasingly piquing the interest of firms that may once have been hesitant to sign deals greater than one or two years.
McQuire said that he used to encounter companies unsure of Google’s committement to the cloud: “How long is this cloud thing going to be around?” he told Insider they’d ask. “Are you in it for the long haul?'”
Google’s pattern of releasing products and then killing them off after a few years unless they reached massive scale posed a big problem for Google Cloud, he said. At one point, Google Cloud had the ambitious goal of becoming the number two cloud within a “five-year window,” a source told Insider in 2019, but it still lags significantly behind Amazon Web Services and Microsoft in market share. For companies to decide to move to Google Cloud, they need to trust that its services won’t vanish in a few years, McQuire said.
“That’s a challenge customers have had at Google,” McQuire said. “It’s a challenge that Google is well aware of.”
As part of building up trust, Google Cloud had to invest in customer support and reassure its customers about the longevity of its products, McQuire said: “The enterprise needs more reassurance if they’re going to make pretty big investments in a provider.”
Insider previously reported that Kurian and other product leaders have prioritized improving Google’s reputation when it comes to deprecation policies. The product organization has been working to design a general deprecation policy that would give customers assurance that Google Cloud’s products will “stand the test of time,” an employee told Insider in January.
Deals like that with Groupo Globo — or Twitter and Univision, which also recently announced multi-year deals — show that that shift is happening.
“They signal that Google has adapted and made some support changes and investment to build that trust,” McQuire said.
Google Cloud is not yet profitable and reported an operating loss of $974 million in its first quarter, which the firm attributed largely to significant investment in building out data centers and staffing up.
“I think it is a concern for the period we’re in, but it’s a necessary evil for Google Cloud because of the level of investment that’s required to execute on its strategy,” McQuire said. “We’ll see that level out over time. That will be a positive step for Google.”
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