Google Cloud plans more data centres in Middle East expansion push

Alphabet’s Google, which is spending billions of dollars globally to compete with Amazon and Microsoft in the cloud space, is considering plans to build more data centres in the Middle East, a key market and one of fastest growing regions for the company’s business.

The company, which is already building data centres in Saudi Arabia and Qatar and has just opened a new cloud region in Israel, is considering several options, Thomas Kurian, chief executive of Google Cloud, told The National in an interview.

“There are many discussions going on in different countries,” Mr Kurian said. “We haven’t disclosed that yet but we are obviously looking at multiple places; Kuwait, UAE and others as potential areas.”

Each new cloud region that Google Cloud builds typically has three data centres.

“So, the kingdom itself has three [data centres], Qatar has three and Israel has three. Each location that we announce is a triad,” he said, declining to specify how much the company plans to invest in the region.

“We don't share our dollar figures publicly, but you can assume that [investment in] each cloud region is in hundreds of millions of dollars in capital, north of that,” Mr Kurian said.

These are all multiyear projects and when the company builds data centres, “we're looking at an eight- to 10-year horizon because it's a large investment.”

The push to expand its business in the Middle East is part of the company’s global expansion drive. It currently has 35 cloud regions live with 106 data centres. Alphabet’s Google has also announced plans to develop 14 more cloud regions globally.

The Middle East, along with Asia, has the fastest growing regions for Google Cloud and the company expects the trend to continue over the five-year horizon as it expands its regional footprint.

The competition among global technology and software companies is heating up to set up operations in the region and increase market share aggressively.

Amazon Web Services (AWS) is looking to strengthen its position with the second cloud region in the UAE. IBM and Alibaba are among other players that are setting up their own data centres in the Arab world's second-largest economy.

The growth Google Cloud has so far achieved in the Middle East region has been exponential and Mr Kurian is pushing to maintain the momentum going forward.

“Just to give you a sense, three years ago … we didn't have a go-to market organisation and we didn't have a local partner ecosystem. We didn't have any of that,” he said.

“Now we have direct presence in five countries. You will see us expanding in the years ahead and you will see us continue to expand at least at the same rate as we are today.”

Saudi Arabia is one of the fastest growing economies in the G20 and as it matures, “we expect technology to become a bigger part of the overall economic growth so we're confident that our business will continue to grow [there],” Mr Kurian said.

“We definitely see that trend continuing.”

Its clients in the region range from government ministries to the telecoms industry, banks and financial institutions, and sectors including travel and tourism and retail, where its serving companies include e-commerce platform Noon and online fashion retailer Namshi.

Cloud adoption is helping businesses in the Middle East and Africa to cut overall operational costs, boost profitability and seamlessly address Covid-19-driven market disruptions.

Cloud adoption allows companies to pivot their business strategies, harness data and AI, improve customer experience and become more adaptable and agile amid a shifting global macroeconomic scenario.

It is more economical for businesses to move to a cloud system provided by a specialised company than to create their own infrastructure of servers, hardware and security networks.

With cloud adoption on the rise, companies such as Amazon, Microsoft and Google are spending billions on developing their cloud computing infrastructure.

The global cloud computing market was valued at $368.97 billion last year and is projected to grow at a compound annual rate of almost 16 per cent from 2022 to 2030, with emerging technologies such as AI and machine learning among its primary drivers, according to Grand View Research.

Globally, spending on public cloud services is expected to jump 20.4 per cent annually to $495bn this year, as the pace of digital transformation of businesses accelerates in the post-Covid era, according to a report by US researcher Gartner.

Total spending is about $84bn more than in 2020 and is expected to surge nearly 21.3 per cent annually to almost $600bn next year, Gartner said.

So far, Google Cloud has expanded its operations organically in the Middle East, but it is open to acquiring businesses.

“We build our team, we invest in our own data centres, and we build our own footprint. [But] we have not said no to inorganic [growth] … we are always open”, however, there is nothing on the radar in terms of acquisition targets in the region, he said.

Google in September completed a $5.4bn deal to acquire Mandiant to beef up its cloud business amid growing cybersecurity challenges for companies in various industries and government agencies.

“It's an acquisition that complements our existing strengths. And whenever we find a good, complementary product fit, we obviously evaluate it,” Mr Kurian said.

Globally, Google is among the fastest growing cloud providers for the past three years on the back of investments “we've made in broadening our global footprint”, he said.

“The cloud market itself is quite large and there are many, many different players in it, but we are quite confident in our position and the growth we've seen.”

Amazon Web Services is the world's biggest cloud services provider, controlling a third of the global market as of the first quarter of 2022, according to data from Statista.

Microsoft's Azure and Google Cloud are next, with market shares of 21 per cent and 8 per cent, respectively, it said.

Mr Kurian said the current global economic outlook has not derailed the company’s investment plans.

“We're obviously monitoring as we have to manage the business in a sensible way,” he said.

However, the long-term bet is that technology will continue to “permeate every industry and that cloud computing is going to deliver real productivity growth.”

Cloud continues to be the fastest growing business for Alphabet, with total revenue from the cloud business growing at an annual rate of 38 per cent to about $6.8bn in the July-September period.

“We are investing for the long term … we're very confident that when we make an investment, we are going to get the right returns,” he said.

“Our businesses … it's growing very quickly, and we expect it to be this year about 10 per cent of Alphabet's revenue.”