Google restructuring could rein in business 'chaos'
- 12 August, 2015 01:12
With the restructuring of its business announced Monday, Google may be trying to gain control over the chaos that its myriad of projects and new business ventures has created.
"This is what they should have done years ago," said Jeff Kagan, an independent industry analyst. "They've gotten out of control... As Google gets bigger with all of these different businesses, they get sluggish. They've gotten too big with too many arms and they're going in too many directions. This should deal with that."
Google, most well known for its ubiquitous search engine, has grown in multiple directions over the last several years.
The company has the popular Android mobile platform, a cloud computing business, Gmail, a cloud-based office suite, the Chrome web browser, the Chrome OS, its Project Ara Lego-like smartphone, a free music service and its Nexus mobile devices.
Oh, but Google hasn't stopped there.
The company also is working on robotics, self-driving cars, the wearable Google Glass, the struggling Google+ social network, delivery drones, its Google Fi network and even Project Loon, a network of high-altitude balloons researchers hope will bring connectivity to people in remote areas. It also has its life sciences projects with Calico, which is studying longevity.
"They have so many businesses in so many different industries and very few of them are related," Kagan said. "It's really incredible how many different businesses there are, and only a few of them are real and profitable, like search and Android. You've got Google cars driving around. You've got drones and balloons in the stratosphere. It's really incredible."
To handle all of these different areas of interest and business, Google announced late Monday the creation of a parent company called Alphabet Inc. Google will become one of its wholly owned subsidiaries.
Alphabet, which is not expected to be a consumer brand with its own related products, will replace Google as the publicly traded entity, with shares of Google morphing into the same number of shares of Alphabet.
Google also has been trimmed of projects that don't neatly align with its core Internet-focused businesses.
For example, Google X, the company's secretive, research arm, will be its own business under the Alphabet umbrella, as will Life Sciences, which includes research on the glucose-sensing contact lens, and a startup funding operation called Capital and Ventures.
Larry Page, a Google co-founder, will be the CEO of Alphabet, while co-founder Sergey Brin will act as its president.
Sundar Pichai, who had been a vice president at Google overseeing Android, Chrome and Google apps, was named CEO of the new trimmer Google.
"The change itself does not entail any changes to product," said Scott Strawn, an analyst with IDC. "It's about corporate structure... People don't need to worry this will change Google search or Android."
Down the road, the restructuring could eventually lead to the company's getting rid of lagging business ventures or research projects but Strawn doesn't expect anything to happen immediately.
"I don't think that's linked to this move," said Strawn. "The shuffle could place people in charge to make those decisions. As roles change, different people will make different decisions."
However, the massive restructuring also could bring its own problems.
Another layer of management at the Alphabet level could make it more difficult for some business units to get the attention they need.
Different CEOs working under the Alphabet umbrella will have their own methodologies and when some become more successful than others, internal battles could pop up, shifting focus and possibly funding.
"I expect Google will use this to make sense of chaos, but things go wrong," said Strawn. "You never know."
Judith Hurwitz, an analyst with Hurwitz & Associates LLC, said the move could make the company more structured and disciplined.
"Instead of having one big company where things can get lost, you'll have multiple divisions with their own specific budgets and people overseeing them," she said. "You can't hide things so much now. I'm sure there are a million little projects all over the place that people don't even know exist."
The restructuring should give Google a needed boost, according to Hurwitz.
"If you have a person responsible for a division and there's new accountability," she said. "It will change the whole equilibrium of the company. It could be pretty exciting if it works."