Google cloud chief has high-stakes plan to beat Amazon

Google cloud queen Diane Greene is ready to rule
Google cloud queen Diane Greene is ready to rule

On a clear afternoon in late April, Google's newly anointed cloud queen, Diane Greene, took a drive to Menlo Park's Sand Hill Road, home to Silicon Valley's most prominent financiers.

Famous for co-founding computing innovator VMware, Greene no longer has to hit up venture capitalists for money. Rather, five months into her new gig Greene took two hours out of her Tuesday to visit with a group of high-growth start-ups backed by Andreessen Horowitz.

Engineering heads and founders from companies including Slack, Pinterest, Mixpanel and Databricks gathered in a conference room at the luxurious Rosewood Sand Hill hotel for coffee, cookies and a lengthy discussion on the future of the cloud, according to multiple attendees, who asked not to be named because the event was private.

Urs Holzle, Google's senior vice president for technical infrastructure, speaks about the Google Cloud Platform during a conference on June 25, 2014, in San Francisco.
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Marc Andreessen, the venture firm's co-founder, was there with his own set of questions. His fund invested in Greene's last company, Bebop, which Google bought for $380 million in November principally to hire Greene.

The meeting could have been awkward. Of the nine companies in attendance, all but one rely on Amazon Web Services, Google's main rival in cloud computing, the attendees said. The other uses IBM's SoftLayer.

But Greene, who was joined by Google's vice president of cloud platforms Brian Stevens, expects as much.

"Any company that went to the cloud over three years ago, they went to Amazon," Greene said in an interview earlier this month at the TiEcon Entrepreneurship Conference in Santa Clara, where she was a keynote speaker. "Back then it was still early days for us."

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Greene declined to comment on the Andreessen meeting and was talking generally about Google's position in the market. A spokesperson for Andreessen also declined to comment and said only that the firm regularly hosts meetings for its portfolio companies.

Greene and the Google Cloud Platform face a steep climb in cloud infrastructure. Amazon and Microsoft have big head starts in capturing an ever-increasing amount of customers' computing and storage needs.

Google's progress under Greene will be a hot topic at the Google I/O developer conference from Wednesday through Friday, near the company's headquarters in Mountain View, California.

Here's the challenge: AWS is a decade old, generates $10 billion in annual revenue and has established a dominant position by managing Netflix's streaming service, building a cloud for the CIA and serving over 1 million customers. Meanwhile, Microsoft's Azure service gets to piggyback on the software maker's footprint in offices around the world and its massive enterprise sales force.

Greene can handle the market share problem. Even though Google commands only 4 percent of the industry's revenue, based on data from Synergy Research Group, the pie is quickly growing. According to Gartner, the cloud infrastructure market will climb 31 percent a year to $61.9 billion in 2020, up from $16.3 billion in 2015.

In Greene's corner is an engineering juggernaut like none other, a company in parent Alphabet stuffed with $75 billion in cash, a $10 billion annual capital expenditure budget and a vast network of highly sophisticated data centers.

Open source projects, big data tools, analytics software and artificial intelligence projects are on full display across the sprawling Silicon Valley campus.

Greene likes to geek out on subjects like Kubernetes, Google's open-source container technology unveiled in 2014 to help developers scale, deploy and tweak their applications across machines and clouds. It's GCP's fastest growing product.

"Customers love that we're so committed to open source and open APIs," Greene said. Application program interfaces, or APIs, are a way for companies to let outside developers easily access their technology.

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Pushing back against Google's cloud momentum is a deep skepticism over whether a company that generates 90 percent of its revenue from placing ads in search results, YouTube videos and mobile apps, can win the hearts, minds and wallets of the enterprise.

Google, let's not forget, is built on giving stuff away to consumers in return for their personal data. Tracking users' whereabouts, behaviors and preferences enable the company to target you with relevant ads in search results and all over the web and establish deep pattern recognition to predict what you want based on how people with similar attributes act.

How can that very same company be trusted to lock down a corporation's most sensitive data — contracts, business relationships, intellectual property — so that its key assets are inaccessible to anyone, including Google?

Urs Holzle, Google's senior vice president for technical infrastructure, speaks about the Google Cloud Platform during a conference on June 25, 2014, in San Francisco.
Stephen Lam | Getty Images

"In one world, you're taking advantage of consumers, and in the business world it's the exact opposite," said Gordon Ritter, a partner at venture firm Emergence Capital, an early investor in and many other cloud software companies. "It's going to be really interesting to see how that DNA shifts."

Ritter is quick to acknowledge that he wants Google to succeed because Emergence's portfolio companies, like Andreessen's, thirst for alternatives. Too much control in the hands of Amazon is a scary proposition, particularly as AWS adds technology that increasingly competes with venture-funded database technology and business intelligence vendors.

Ritter shouldn't have trouble getting an Andreessen-esque meeting for his companies. In April, Greene lured Alison Wagonfeld away from Emergence, where she was an operating partner, to run marketing for the Google cloud.

"We have a very firm line in," he said.

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Beyond the technical and philosophical hurdles, Greene has to build a world-class enterprise sales, service and support organization that rivals traditional names like Oracle and IBM. At the same time, she has to educate the world's leading corporations on how they can use Google's 16 years of machine learning expertise to their advantage.

Google has struggled to crack the enterprise in its decade of selling cloud applications like e-mail, spreadsheets and presentations to businesses. It's been on the market with web hosting and app developer tools for eight years and launched GCP in 2011.

The needle has barely budged. Morgan Stanley estimates Google's cloud infrastructure generated about $500 million in revenue last year, a small fraction of AWS.

Whether or not Greene can dent Amazon's lead, she is at least viewed as bringing the enterprise credibility that's been sorely lacking. As Pacific Crest Securities analyst Evan Wilson wrote in a March 23 report, "Alphabet has the infrastructure in place to support this initiative, now it is Greene's time to execute and bring it all together."

Cloud infrastructure revenue

Year Sales Growth
2016$22.4 bln37%
2017$30.2 bln34%
2018$39.4 bln31%
2019$49.9 bln27%
2020$61.9 bln24%

Source: Source: Gartner

In addition to hiring Wagonfeld, Greene elevated Nan Boden, who joined Google in 2013, to oversee partnerships. In February, she brought in former VMware executive Jason Martin to help build a professional services operation, and she's aggressively bulking up her sales staff.

Greene has done this before. At VMware, she and her husband Mendel Rosenblum, a Stanford University computer science professor, created the virtual machine, giving businesses remote control of their data centers in a precloud world. She knows that nothing matters more in gaining the trust of enterprises than security and reliability.

Greene is so addicted to this stuff that her first day on the job took her not to Mountain View or one of Google's key satellite offices, but to the small Midwestern town of Council Bluffs, Iowa.

Why? To see a giant Google data center.

Google Data Center in Council Bluffs, Iowa
Source: Google

Completed in 2008, the Council Bluffs facility is Google's biggest with over 115,000 square feet of space. Google said last year that it will invest another $1 billion expanding its operation there, on top of the $1.5 billion it's already spent, taking advantage of some healthy state tax incentives. The company plans to open 12 additional data centers across the globe through 2017.

Greene toured the Council Bluffs space, checking out the generators, cooling systems and how all the servers are racked and wired. Retina scans are required to enter.

She described the building's physical and virtual security in her keynote at TiEcon.

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When entering the front gates, if an unauthorized vehicle tries to tailgate its way in, it gets captured by a giant net, she told the audience. On the inside, if you're unable to "zero out a disk," or delete all its contents, it gets put through a metal shredding machine.

"You have this incredible physical security," she said. "And then you have all the automated tools which we're increasingly going to be able to bring to applications and customers for detecting any kind of threat and increasingly applying machine learning."

Greene spoke to a packed conference room for a half hour. That wasn't nearly long enough for about a dozen attendees who followed her out the door, through the exhibit hall, out the exit and all the way to the black car waiting for her in the parking lot.

I was trying to help him find someone to run this thing. I felt it was really important for Google to bring this to the world.
Diane Greene
head of Google cloud

She's a hot commodity, certainly hotter than she expected to be last year at this time.

Greene was running a stealthy start-up called Bebop that she'd started a few years earlier. She was approaching 60, had made a fortune from co-founding and running VMware for 10 years, suffered through a prickly departure, and was enjoying life working with a few friends.

But as a Google board member and with a deep history in infrastructure, she got to know Urs Holzle, Google's eighth employee and the guy responsible for configuring much of the company's most complicated backend technology.

"The more we talked, he was, I now realize, recruiting me," she said on stage. "I was trying to help him find someone to run this thing. I felt it was really important for Google to bring all this to the world."

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Now she's out evangelizing, and she has some case studies to bring with her. Digital music service Spotify relies on GCP and boasts about BigQuery, a low-cost, high-powered data warehouse. Domino's Pizza slashed 80 percent off ad serving and operations costs after deploying Google analytics tools to better understand, across devices, user behavior.

Snapchat is a vocal advocate, Home Depot recently became a customer, and just last month Google and Autodesk partnered to deliver technology that more quickly renders 3-D images for Autodesk's media customers.

Autodesk remains a big-time AWS spender, counting on Amazon's infrastructure as it migrates from desktop software to the cloud. The Google deal, which is targeted at specific types of Autodesk clients, is a critical example of where Greene sees the world headed.

Cloud infrastructure is no longer just about the bare metal that computing giants use to host other companies' computing and storage. That's turned into a pricing war and one Amazon will never lose. CEO Jeff Bezos said in his recent shareholder letter that AWS has dropped prices 51 times.

Amazon cloud growth up 69%
Amazon cloud growth up 69%

Cloud is now about the many different types of projects that can run on the supercomputers, benefiting from the software engineering at Google and Amazon as well as a new generation of internet companies. Some of that stuff may work better on AWS, and other workloads will go to Google or Microsoft, but success doesn't rely on owning 100 percent of a company's cloud needs.

"We're all living in a multicloud world," said Aaron Levie, CEO of collaboration software provider Box, which has partnerships with AWS and IBM's cloud to take advantage of the scale they provide. "They simultaneously are each going to have their own distinct value proposition."

Box doesn't yet have a deal with GCP, but there's good reason to think one is coming in the future as Google's product matures and performance rivals AWS. Similarly, Rackspace, a provider of managed cloud services to support companies with their IT needs, is looking for ways to work with Google.

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Last year, Rackspace announced deals to support AWS and Azure and expects to do the same with Google "at the right time, when the demand is there from business customers," said Taylor Rhodes, CEO of the San Antonio-based company. Separately, the two companies announced in April that they're working together to create an open server system based on a new IBM processor.

"I'm super partner-oriented," Greene said. "That's how I built VMware."

The money is there to be had. By 2019, 86 percent of workloads will be in the cloud, according to data from Cisco, and 56 percent of that will be in public cloud data centers, up from 30 percent in 2014.

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Among early-stage start-ups, Google is gaining traction. Erik Benson, a partner at venture firm Voyager Capital in Seattle, said about half his companies now run on Google's cloud, compared to five years ago when the "de facto standard was AWS."

Google incentivizes start-up developers with $100,000 in credits for a year, which presented an attractive opportunity for Cloudtenna. Founded in 2012, the Sunnyvale-based company is building enterprise search technology that lets customers find, view and virtually share any in-house file.

When customers send documents and collaborate on projects, the work is happening in the Google cloud even though the actual files are typically being stored in a company's physical data centers. Cloudtenna tried out computing services from Amazon and Microsoft before landing on Google about a year ago.

Cloudtenna’s search technology.
Source: Cloudtenna

"In terms of what kind of uptime do you have and how fast can you deliver for users, Google was number one by far," said Bryan Pham, Cloudtenna's co-founder and chief technology officer. The company utilizes Google's core compute engine and is currently testing out the machine learning technology, Pham said.

If Google has its way, a healthy number of start-ups like Cloudtenna will grow into formidable businesses and become big spenders. But just as important is attracting emerging software companies that will come up with innovative ways to use Google's cloud for their customers.

From Greene's perspective, it doesn't so much matter who's winning today, because the market is in its infancy.

Her prediction at TiEcon: "I think a couple years from now things are going to look pretty darn different."