Google is announcingOpens a new window job cuts as part of a restructure that may signal a turning point in its cloud business to confront competition from Microsoft and Amazon Web Services.
The 50 layoffs as reported by CNBC are surprising given that Google last year unveiled plans to triple sales staff at the cloud division.
Google Cloud had earlier embarked on a hiring spree. Its parent company Alphabet took onÂ 6,450Opens a new window employees in the third quarter of 2019 and said most would work for the cloud unit, apparently in marketing and technology.
One interpretation: Since Google wants to boost sales of cloud services to large enterprise customers and gain greater global coverage, the job cuts could impact the staff that services small businesses.
The giant Silicon Valley internet company has given little information about who will be laid off or what’s being restructured. But a source close to the company told CNBCÂ the restructure is aimed at increasing Google Cloud’s focus on international markets. A Google spokesperson sent an email to the news organization saying the move â€œwill improve how we market, partner and engage with customers in every industry around the globe.â€
A small number of employees were told â€œtheir roles will be eliminated,â€ the email said.
Catching up with cloud leaders
Google Cloud needs to win large enterprise business customers as it drives to catch up with cloud market leaders AWS and Microsoft Azure. The company known best for its search engine and Gmail service aimsOpens a new window Â to become the second-largest cloud provider by 2024 and even has threatened to withdraw from the cloud market if it fails.
Alphabet has for the first time revealed revenue figures for the cloud unit. Its 2019 fourth quarter results show cloud revenues of $2.61 billion, a 53% rise over the same quarter in 2018. During full year 2019, Google Cloud generated $8.92 billion in revenue.
While this figure pales before Alphabet’s total $162 billion in total 2019 revenues, cloud is a fast-growing area.
Still it won’t be easy to catch market leader AWS or second-place Microsoft Azure. Google Cloud’s revenue comes to a quarter of that reported by Amazon Wholesale Services, which hit $35 billon last year. Microsoft Azure is thought to have reached some $20 billion in sales.
The cloud market is vital for Alphabet as ad revenue wobbles. About 90% of Google’s revenues come from online advertising but its growth is in question. The ad market is close to saturation, while moves to crack down on third-party cookies and online tracking could make online advertising less attractive for brands and reduce profits to advertising vehicles.
Former Oracle exec buys Google’s strategy
Google poached its cloud unit chief executive, Thomas Kurian, in 2018 from Oracle Corp. Google may want to tap his experience in working with large corporations he built up over years at the fellow Silicon Valley tech firm.
Earlier this month, Kurian shed light at a Goldman Sachs tech conference on how Google Cloud will build sales in coming years: concentrate resources on offering digital transformation services in five industries â€” retail, healthcare, financial services, media and entertainment and manufacturing.
Kurian said Google Cloud has developed artificial intelligence for each industry. That means behavioral analytics for retail, compliance for financial services and genomic data modeling for healthcare.
Some have noted that this kind of industry-specific focus is reminiscent of Oracle’s strategy. It also plays to Google’s strengths in AI, where it’s surging ahead after many acquisitions over the past 10 years.