Client demand for shorter AI deals reshapes Google's cloud market battle
New Delhi: The advent of generative artificial intelligence (AI) has prompted clients to seek shorter, more flexible deals with cloud service providers, as the rapid pace of innovation makes long-term commitments to a single provider less attractive, a top executive at Google’s cloud services arm said.
Clients are increasingly opting for shorter, more agile cloud agreements to quickly adopt the latest AI technologies, Karan Bajwa, president of Asia Pacific at Google Cloud, told Mint in an interview.
“The older business model that saw cloud platforms sign very long-term deals is no longer true. Enterprises are looking to experiment with the latest AI tools and services, and they want flexibility for that as AI innovation typically progresses at a very rapid pace. To offer this, we’re catering to clients who are signing up rapid, short-term deals, which we hope will convert into long-term business, with AI at the centre,” Bajwa said.
IT services deals are also getting shorter
To be sure, cloud service providers aren't the only ones seeing this shift. India's top IT services firms, which once relied on five-year, billion-dollar deals, are also increasingly reporting shorter deal tenures amid the rise of AI.
On 15 October, LTM (formerly LTIMindtree) chief executive Venu Lambu said during the company’s second-quarter earnings call that most of its deal wins in the period were short-tenure AI contracts of six months to one year. In July, TCS chief K. Krithivasan also said AI revenue lacks recurring annual deals like previous IT maintenance contracts, and often span across only a quarter or two.
Google is the world’s third-largest cloud services provider, after Amazon’s Amazon Web Services (AWS) and Microsoft’s Azure, both in India and globally. The company's July-September quarter performance was reported as part of parent Alphabet's earnings announcement on 28 October. Cloud revenue doubled year-on-year to $30.71 billion from $15.16 billion a year earlier, driven by growing adoption of its cloud platform for AI workloads, Bajwa said.
Driving this growth, Bajwa said, is “the fact that we’re the only major cloud provider in the world that offers companies access to absolutely every AI model suite in the world, including both OpenAI’s and Anthropic’s—that’s not something that our biggest competitors do right now.”
On 8 July, Thomas Kurian, the global chief of Google Cloud and to whom Bajwa reports, had stated that “enterprises are how we’re pushing the adoption of AI to customers.”
Industry stakeholders backed this approach, underlining that Google’s competitive pricing and modular AI offering has significantly boosted its demand. “Google Cloud is coming off the back of sharp growth, as seen from Alphabet’s latest earnings. This is because Google controls the entire value chain of AI, cloud and data centres, and in almost every field, plays an influential leadership role. This is being seen in enterprise deals that the company has been steadily signing,” said Anushree Verma, senior director analyst, emerging technologies at Gartner.
Google, to be sure, offers its own Tensor Processing Unit (TPU) AI chips, a Gemini family of AI models, applications including Gemini, NotebookLM and the Google Worksuite, and its own cloud and data centres as well via Google Cloud.
Its closest competitors have also made similar pitches. AWS has its own Trainium family of AI chips, while Microsoft has Maia. In AI models too, AWS has its Nova suite of AI tools, while Microsoft offers MAI. Neither, however, is as popular as Gemini, according to Hugging Face, a global usage leaderboards on AI indexing and repository platform.
On 2 November, independent market research platform Synergy Research Group pegged AWS to have retained the top spot in global cloud market with a 26% share. Microsoft Azure held 19%, followed by Google Cloud at 16%. Google emerged as the fastest-growing cloud service provider in the September quarter, and has rapidly caught up with its competitors—in 2023, AWS had a 33% market share, followed by Microsoft Azure at 24% and Google Cloud at 11%.
India, however, accounts for a comparatively small share of Google Cloud's business, although Bajwa declined to disclose the region's contribution to revenue. Latest financials filed by Google Cloud India Private Limited with the Ministry of Corporate Affairs showed ₹2,019.3 crore in operating revenue in FY25. The company was yet to file its FY26 earnings.
“More than revenue, India is a strategically crucial hub due to the sheer size and importance of the market. Overall, our India business is growing at a proportionate rate as the rest of the world too,” Bajwa said.
Bajwa noted that India’s push for sovereign data centres and cloud services is visible across Asia and the rest of the world. “Most governments have their own strategic needs, as does India. We offer our distributed cloud sovereign offering that powers multiple government services already, and this is true across the world too.”
As a result, traditional global data centre hubs such as Singapore could give way to sovereign data centre infrastructure in major countries, Bajwa said.
“This is a natural course of action, and over the next five years, we’ll see more countries prioritize sovereignty to host data centres in their geography. The goal is to have their own workload in their own countries, but one that works with the rest of the world too,” he added.
While Bajwa declined to share details of Google's future data centre expansion plans in India beyond the 1-gigawatt (GW) facility under construction in Visakhapatnam, Kurian had earlier told Mint that the company would invest more as demand grows, adding that the current facility “was not meant to be the last.”