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Google to Acquire Velostrata in Effort to Make Enterprise Cloud Migration Easier

By Evan Niu, CFA - May 9, 2018 at 8:53PM

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The search giant wants to maintain the momentum that Google Cloud is enjoying.

Alphabet (GOOG -0.27%) (GOOGL -0.21%) subsidiary Google has just announced that it plans to acquire Israel-based Velostrata, a start-up that specializes in helping enterprises migrate to the cloud. The cloud infrastructure market is booming, as newer companies increasingly realize they can utilize third-party infrastructure in the early days to great benefit, while more mature companies often supplement first-party infrastructure with third-party offerings to bolster performance and reliability.

Migrating on-premise operations into the cloud is no small task, and that's where Velostrata comes in. By acquiring Velostrata, Google hopes to integrate these capabilities more seamlessly, getting faster access to Google Cloud's benefits. "This means they can easily and quickly migrate virtual machine-based workloads like large databases, enterprise applications, DevOps, and large batch processing to and from the cloud," according to Google Cloud VP of Engineering Eyal Manor. No financial terms were disclosed.

Illustration of data being uploaded to the cloud

Image source: Getty Images.

Google liked what it saw last month

The news comes exactly a month after Velostrata partnered with Google to accelerate enterprise cloud migration. In that announcement, Velostrata pointed out that companies enjoy meaningful cost savings associated with a faster cloud migration. If the migration takes too long, companies often incur additional capital and operational expenditures associated with dual infrastructure costs while the migration is occurring.

Velostrata leverages what it calls "agentless real-time streaming technology" to achieve faster migrations. The acquisition target currently helps enterprise customers migrate to the three largest cloud infrastructure platforms: Google Cloud Platform (GCP), Amazon (AMZN 3.15%) Web Services (AWS), and Microsoft Azure.

It looks like Google liked what it saw, and now wants the whole thing.

Still chasing the market leader

Of course, AWS is the market leader here by a wide margin, and Amazon naturally has a mature cloud migration program in place as well, as well as other third-party providers for cloud migration services beyond Velostrata.

Google does not disclose Google Cloud revenue directly, but during its fourth-quarter earnings call in February, CEO Sundar Pichai said the business had reached an important milestone of $1 billion in quarterly revenue. On the first-quarter earnings call last month, Pichai followed up and said that Google Cloud "saw increasing momentum" during the quarter. That still pales in comparison to market leader AWS, which brought in $5.4 billion in sales in the first quarter.

It's also true that Google Cloud needs to continue diversifying its customer base. Its largest customer is undoubtedly Snap, which spent $400 million on Google Cloud last year and has committed to that same level of annual spending through 2021.

The broader picture is that Google is taking the enterprise more seriously across all of its offerings. Even the redesigned Gmail -- one of Google's most popular consumer-facing services, with 1.4 billion monthly active users (MAUs) -- has new features designed with businesses in mind. The Velostrata acquisition is a part of that overarching strategy.

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