In mid-December, 8,000 developers met in Seattle for KubeCon, a conference on Kubernetes, a popular open source software tool originally developed by Google.
There, in the densely populated borders of the Washington State Convention Center, an old, well-known rumor spread: Google would acquire Atlassian, a popular developer software company with a market capitalization of over $ 20 billion. And it would happen soon.
KubeCon came and went, and Google did not buy Atlassian – or at least not yet.
But at the root of this gossip lies a kernel of truth that Tech M & A insiders across the industry expect to see in the coming months and years: Google Cloud needs to make an acquisition if it does Moving beyond the status of bronze medal in the cloud race, where Amazon Web Services and Microsoft Azure are so far ahead.
Greene missed GitHub and RedHat
The biggest sign of change was Google Cloud in mid-November, when CEO Diane Greene announced that she would step down from her role. Thomas Kurian, Oracle's longtime product president, joined Google Cloud in late November. He will be wholly owned by Greene this month, although Greene will continue to be on the board of Alphabet.
Greene is a renowned technologist and product expert known for starting and running VMware, but on Google Cloud, business analysts and customers were less satisfied.
Especially under Greene, Google Cloud had difficulty selling to the kind of big companies that pay the bills of Amazon Web Services, Microsoft Azure, and Oracle.
Alex J. Zukin, an analyst with PiperJaffray, said in a note to customers that Google Cloud's information officers and partners call "fantastic technology," but they believe there is a lack of "maturity and commitment to sales, the service and support of companies. " , "
Its biggest competitive advantage is in artificial intelligence and machine learning, as well as in price," said Zukin.
"In that sense, we would expect Google to make more acquisitions to bolster companies' credibility and sales capacity Zukin wrote.
During Greene's three-year tenure as CEO, Google Cloud made around a dozen small acquisitions and acquisitions, but nothing that changed the status Quo shook up or redesigned its business model.
Greene had the opportunity to extend Google's business much deeper into the so-called Hybrid Cloud, a specialized market dominated by Microsoft's acquisition of Red Hat, but Google missed the opportunity, and IBM would announce its intention in late October, it for 34 billion US-Do
Read More: IBM's $ 34 billion acquisition of Red Hat came after negotiation talks with Microsoft, Google, and Amazon.
In the months leading up to IBM's mega deal, Greene entered into a close relationship The Red Hat team told Business Insider in December. She tried, however, for the support of her colleagues at Google to actually make an offer, it was said then.
Instead, Google asked whether Red Hat would explore a commercial partnership and a minority stake, which Red Hat declined in favor of the IBM deal.
It was the second time in 2018 that Google lost to a competitor in a major, groundbreaking acquisition – Greene also looked to GitHub before Microsoft bought it in June for $ 7.5 billion. Although the talks lasted for weeks, Google's offer had come nowhere near, reported CNBC in June.
Kurian was known for M & A at Oracle.
Bankers and insiders told business insiders that they expect Kurian to see eye-catching deals In order to get Google Cloud on a more aggressive path, they cautioned it with its new role in the role could take some time for this to happen.
One reason for this belief is that Kurian has a strong track record at M & A. At Oracle, he was known for acquiring dozens of smaller companies at Oracle and turning them into profitable business units, as was the case with the 2004 acquisition of Collaxa.
He also led Oracle's major strategic acquisitions, $ 10.3 billion of acquisitions in 2004, and the acquisition of Siebel Systems ($ 5.5 billion in 2005) of 10.3 billion dollars.
"Thomas Kurian has likely acquired more business for the longest period of time than almost all executives in the software industry," said Anshu Sharma, co-founder and chairman of Clearedin, who worked with Kurian at Oracle from 1996 to 2006.
Read more: [WallStreetBankiersteilenwasAttentiontoTechM&AimYear2019
While Kurian's $ 50 million startup strategy worked twenty years ago, Sharma believed that the industry had changed too much to make it possible Startups are more expensive now and can live with private capital for much longer before being carried away by a strategic buyer.
Against this backdrop, Sharma said he believes that it is far more likely that Kurian will do a handful of big deals in his first 18 months. Ultimately, he said, it will depend on how much money Kurian plays with Google.
"When I run Google Cloud, how many GitHubs can I buy for a reasonable price? I think it's clear that you need a lot of M & A to drive this business forward to compete against Amazon and Microsoft "Sharma said. "Unlike in the past, you can not buy 20 companies for $ 2 billion, today you would need 10 to 15 times more money."
Insiders rely on Atlassian, ServiceNow
As long as the rumors at KubeCon are still ongoing To make it happen, industry analysts are a fan of the idea of a merger of Google and Atlassian.
BTIG analyst Joel Fishbein wrote in a note to customers on Wednesday that he "would not be surprised if Atlassian were phased out by a much larger technology company like Google."
"Atlassian has increasingly become a crown jewel in the software arena, and the recent signing of Thomas Kurian to lead the Google Cloud may signal that further major changes are coming in 2019," Fishbein wrote.
The acquisition of Atlassian would restrict Google Cloud developers and fill the gap created by the failed acquisition of GitHub. However, this is just one strategy that will be held in the industry over the next few months.
Zukin of PiperJaffray wrote that he believes ServiceNow and Splunk would give Google Cloud "business credibility," and that Atlassian and Slack would give Google Cloud "credibility and exchange with developers."
Read More: Ten tech companies are sitting on M & A dry powder worth $ 346 billion, which could change the software market as stock levels continue to decline.
PiperJaffray analysts believe this to be the case ServiceNow is the most likely acquisition candidate.
For Sharma, the answer lies with Google In applications, he sees a future merger between Google and Twilio that allows developers to add phone and SMS capabilities to their apps, as well as Okta, the identity management software that companies use to manage passwords.
"When I select a company Sharma would probably need more than anything else, "Sharma said.