What could Alphabet’s biggest acquisition mean for Google's parents and its arch-rivals Microsoft, AWS

Alphabet, Google's parent company, is reportedly in advanced talks to acquire cybersecurity startup Wiz for around $23 billion, potentially Google's largest deal ever. This acquisition aims to bolster Google's cloud security capabilities, positioning it stronger against rivals like Microsoft and Amazon, believe industry experts.

Wiz, a cybersecurity startup founded by Assaf Rappaport in Israel, recently valued at $12 billion, offers advanced cloud security solutions and works with Microsoft and AWS. Its focus on comprehensive cloud risk detection and response has garnered attention, making it a strong competitor to established players like Palo Alto Networks and Zscaler.  in the security space.

Google's interest in Wiz demonstrates its ambition to enhance Google Cloud to rival Microsoft and AWS in the cybersecurity domain, building on its past acquisitions like Mandiant in 2022.

Strengthening security capabilities

The recent move comes after Google's mishap with the Australian pension fund UniSuper’s cloud subscription deletion, which impacted more than 600,000 members and resulted in them being unable to access their accounts for a week and stressed the need for improved internal security measures. Experts suggest that with the acquisition of Wiz, incidents like this can be prevented in the future.

According to Kashyap Kompella, industry analyst and CEO of RPA2AI Research, the Wiz acquisition will enhance Google's capabilities significantly in the security space. 

He believes Google's competitors have already made investments in various areas of enterprise security. For instance, Microsoft has developed reputable products in endpoint security, email security, security operations, and identity and access management. Amazon's approach involves integrating security internally into its tools through partnerships with vendors like CrowdStrike to provide customers with additional protection.

Additionally, companies like Cisco and Palo Alto have strengthened their native network security capabilities through acquisitions in other cybersecurity domains.

“By focusing its cyber-tool portfolio on security operations and adopting a more service-oriented approach in consulting and incident response, Google aims to reduce its dependence on online advertising revenue and stay competitive. Given that AI and security are key areas of technology investment for C-suite, Google may seize the opportunity to enhance its capabilities in these fields,” he noted.

The acquisition of Wiz by Google could significantly enhance Google Cloud’s market position, intensifying competition with AWS and Microsoft Azure. Industry analysts view this move as Google’s strategic bet on cybersecurity, aimed at expanding market share in the growing cloud sector.

An edge over rivals Microsoft, AWS

It is widely known that major players in the cloud industry, such as Google, Microsoft, and Amazon, are fiercely competing for market share in cybersecurity. 

Amazon Web Services currently holds the top spot in cloud computing, with a 31 per cent share of the global market as of the first quarter of 2024. Microsoft follows closely behind with a 25 per cent share, while Google Cloud holds an 11 per cent share, as per industry reports.

Wedbush Securities analyst Dan Ives mentions in its investor notes that for Google this would be a shot across the bow at Microsoft and Amazon making a major bet on the cybersecurity space to complement its flagship GCP offering in the cloud. This strategic decision could give Google an advantage in various cloud deployments and help monetise the cybersecurity cloud sector, especially considering that less than half of global workloads are currently on the cloud, he said.

The acquisition of Wiz could significantly strengthen Google Cloud's position in the market, enabling it to better compete with AWS and Microsoft Azure. While Microsoft has robust cybersecurity tools, its Azure cloud business has faced security breaches. Analyst Brad Zelnick from Deutsche Bank believes that acquiring Wiz would demonstrate Google Cloud Platform's commitment to multi-cloud and cybersecurity, potentially leading to increased market share.

While analysts emphasised the importance of cybersecurity in the cloud and suggested that Google could leverage Wiz's capabilities to gain a larger industry share, they also cautioned that any potential deal would likely face rigorous regulatory scrutiny.

The technology sector has witnessed a surge in mergers and acquisitions in recent months. Synopsys’ purchase of Ansys for around $35 billion, and Hewlett Packard Enterprise’s purchase of Juniper Networks for $14 billion were high-profile transactions. According to financial markets platform Dealogic, technology mergers and acquisitions have surged, accounting for the largest share in the first half of the year, with a 42 per cent year-over-year increase, reaching $327.2 billion, with Google's potential deal with Wiz adding to the trend.