Though it's tough to nail down one particular forecast for future cloud-related revenues, most agree the market is in the early stages of tremendous growth. One prediction suggests spending on cloud technologies will reach $174.2 billion this year, and jump to as much as $235.1 billion by 2017. Not surprisingly, some of the biggest names in technology are aggressively positioning themselves to grab a piece of the cloud pie.
One thing's been made abundantly clear as it relates to gaining a foothold in the cloud, hosting has quickly become a commodity, as leaders such as Amazon.com's (NASDAQ:AMZN) AWS unit, Microsoft (NASDAQ:MSFT), and Google (NASDAQ:GOOG) (NASDAQ:GOOGL) slash cloud storage prices to mere pennies. All those projected cloud revenues will be derived from associated products and services, and Google's just upped the ante as it works to become the industry's undisputed leader of the cloud.
This one's on us
At its Entrepreneurs Global Partner Summit held last week, Google announced a new program called the Cloud Platform for Startups. As the name implies, Google's specifically targeting early stage start-up companies in an effort to gain their cloud-related business. To give you an idea of just how badly the search king wants to expand its cloud customer base, Google said it's giving away up to $100,000 in cloud services to, "eligible early stage start-ups."
Naturally, a deal this good comes with a few caveats. To be eligible for the $100,000 in cloud credits, a start-up must have less than $5 million in funding, and less than $500,000 in annual revenues. Google's cloud unit is hardly new to emerging companies, boasting clients like Snapchat and online education provider Khan Academy.
The start-ups lucky enough to be selected for Google's offer will have access to its entire suite of cloud services, including hosting, management, and big data-related services, among others. Google said it's already working with over 50 strategic partners around the world in an effort to find appropriate, early stage companies to extend its offer to, and plans are to add even more partners in the future.
Today's cloud players
It's difficult to determine who's actually leading the cloud revenue race. Google itself doesn't break out cloud revenues, nor does Amazon share just how much revenue its Amazon Web Services, or AWS, generates. To Microsoft's credit, CEO Satya Nadella is happy to share specifics of his mobile-first, cloud-first efforts. Last quarter, Nadella said Microsoft's cloud revenues were approaching an annual run-rate of about $4.5 billion.
Gaining market share, particularly in a booming up-start market like cloud computing, certainly makes sense. That's why Google, Amazon, and Microsoft have all slashed their respective cloud hosting costs. But what's the upside for Google to give away what is likely to be millions of dollars in cloud revenues to a bunch of business newbies?
What's in it for Google?
As cloud services become more prevalent, and less distinguishable from competitor's offerings, retaining customers could prove to be a challenge. After all, if the C-level tech guru of a large company is offered a chance to get the same level of products and services for less, she'll probably do it in today's world of cost-conscious executives. But now imagine an emerging company a few years down the line that benefited from Google's $100,000 cloud services offer. A competing offer from an AWS or Microsoft would have to be awfully good to pry the former start-up away from Google. Retention is going to become an increasingly important aspect of who wins the cloud wars, and Google's new program will help.
In addition to better retention, as today's start-ups evolve into more mature companies, the opportunity for Google to upsell its services to better meet the needs of what could be a multi-million, or perhaps even multi-billion, dollar company is a natural. Google's cloud services sales team is going to fight over those opportunities. And Google can certainly afford to bide its time and build its cloud customer base and revenues slowly, if need be.
Final Foolish thoughts
The cloud war is on, and if industry projections prove to be anywhere close to on target, there will literally be billions of revenue dollars at stake. And with players like Amazon, Microsoft, and other big-hitters in the mix, Google's decided to get aggressive now to position itself as the solution of choice. Will giving away $100,000 in cloud services turn out to be a wise move? Time will tell, but if we know anything about Google, it's that it certainly isn't shy about taking bold leaps of faith.
Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Google (A shares), and Google (C shares). The Motley Fool owns shares of Amazon.com, Google (A shares), Google (C shares), and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.