What Else Is in Store for Cloud Hyperscalers Now that Google Cloud IoT Core Is No More?

Google’s cloud division reported an annual loss of US$3.1 billion in 2021. While revenue has increased, exceeding US$6 billion, the quarterly loss alone amounted to US$858 million in the second quarter ending June 2022. While Google’s decision to discontinue Google Cloud IoT Core was widely anticipated, the exact timing was uncertain, but the move makes more than just financial sense. For Google, which lags behind in a distant third place in market share of cloud services, the decision to discontinue Internet of Things (IoT) device management services allows it to focus more on core data ingestion and storage services that can allow it to grow in the IT enterprise domain. Thus, it gives Google Cloud more capacity and resources to close the gap with Amazon Web Services (AWS) and Microsoft Azure in the cloud market, where Google Cloud has been making good progress. Nonetheless, Google Cloud will continue to provide a smaller set of IoT products and services, after closing down the IoT core: these include the Edge TPU, which is designed to allow sophisticated Machine Learning (ML) and inference to run for IoT use cases. So, the closure of Google Cloud’s IoT Core is not an entire withdrawal from the IoT given the continued presence of Google Edge TPU for IoT, Google pub/sub, and digital twins for supply chain.

Historically, Google, like other cloud service suppliers, aimed to provide more than just data ingestion and storage. It has developed toolsets designed to add value to an IoT deployment with extra features, including digital twins and ML processing, in addition to the device management of Google Cloud IoT Core. Google had invested its resources in developing these capabilities, but has lagged behind as it introduced the beta of its IoT services in mid-2017 and only had general availability in 2018. By contrast, Microsoft Azure’s IoT Hub had attained general availability in 2016, while AWS IoT Core was launched in 2015 for general availability. Early movers tend to be significantly advantaged, especially for cloud services, as demonstrated by Amazon, which continues to lead Microsoft Azure, having launched AWS 4 years earlier. However, Microsoft Azure IoT has closed the gap to AWS’ IoT services, which shows that early mover advantage is not the sole reason for success. Another reason is that Google Cloud IoT lagged behind Azure and AWS in offering features to enterprise customers. For example, Google Cloud IoT had fewer no-code/low-code developer choices, had limited options for IoT edge services, and lacked a broad breadth of security options for multiple use cases, especially when compared to Azure IoT Hub and AWS IoT Core. As a result, Google Cloud had limited penetration in the enterprise IoT market, which is where the majority of the interest and scale in the IoT has, and will continue to, come. So, the shutdown of Google Cloud’s IoT Core is not expected to create significant disruption for a great number of IoT enterprise customers.

Don’t bet on it. Although worldwide cloud market share is presently dominated by AWS and Microsoft Azure, it should not be assumed that players with smaller market share will follow Google Cloud’s lead and exit from directly providing IoT data ingestion and storage services. For example, Alibaba currently has a small worldwide market share; however, it is relatively well insulated from international competition as Chinese regulators complicate entrance of foreign players in the domestic Chinese cloud market. As cloud computing in China is expected to continue growing and China will constitute a larger percentage of the worldwide cloud market over the coming years, then Chinese players will inevitably increase their market share of the worldwide market. This, coupled with rapid growth of the IoT in China’s domestic market, means Chinese cloud hyperscalers (like Alibaba and Huawei) are well positioned to capitalize on and directly benefit from the barriers to entry in the domestic Chinese cloud market. Whereas Google Cloud IoT had a different fate, not only was it outcompeted by AWS and Microsoft Azure in its home markets, but Google Cloud also had decided against expansion into the Chinese market. In contrast, even AWS and Microsoft Azure have a presence in China, including their IoT cloud services, through a Joint Venture (JV) with local Chinese companies.

Also, unlike Google Cloud IoT, both Alibaba and Huawei’s IoT services have had significant features developed in recent years. For example, Huawei has a very capable IoT device management platform that can act as an entrance point into its IoT ecosystem. Enterprise IoT customers then have the incentive to consider other services in Huawei’s device-to-cloud stack. These include Huawei’s digital twins (device shadow), visualization dashboards and application management tools. Likewise, Alibaba Cloud IoT has expanded in recent years, offering a rules engine alongside device management, as well as device shadow and security. To conclude, Google Cloud IoT Core’s closure shows a moderation in Google Cloud’s ambition. Nonetheless, it is highly unlikely that smaller hyperscalers (especially those in China) would follow Google Cloud’s lead and shut down their equivalent of Google Cloud IoT Core.