What Alphabet’s Biggest Acquisition Could Mean for Google’s Parents and Its Chief Rivals Microsoft and AWS

Google parent company Alphabet is reportedly in advanced talks to acquire cybersecurity startup Wiz for about $23 billion, potentially Google’s largest transaction ever. The acquisition is intended to bolster Google’s cloud security capabilities, bolstering its position against rivals like Microsoft and Amazon, industry experts say.

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

Google’s interest in Wiz is indicative of the company’s ambition to enhance Google Cloud to compete with Microsoft and AWS in cybersecurity, building on previous acquisitions such as Mandiant in 2022.

Strengthening security capabilities

The latest move comes after Google’s deletion of Australian superannuation fund UniSuper’s cloud subscriptions, which affected more than 600,000 members and left them unable to access their accounts for a week, and underscored the need to improve internal security measures. Experts suggest that the acquisition of Wiz could prevent incidents like this in the future.

According to Kashyap Kompelli, industry analyst and CEO of RPA2AI Research, the acquisition of Wiz will significantly strengthen Google’s capabilities in the security space.

He believes Google’s competitors have already invested in various areas of enterprise security. Microsoft, for example, has established respected products in endpoint security, email security, security operations, and identity and access management. Amazon’s approach includes internally integrating security into its tools through partnerships with vendors like CrowdStrike to provide customers with additional protection.

Additionally, companies like Cisco and Palo Alto have bolstered their network security capabilities through acquisitions in other areas of cybersecurity.

“By focusing its cyber portfolio on security operations and taking a more service-oriented approach to consulting and incident response, Google aims to reduce its reliance on online advertising revenue and remain competitive. Given that AI and security are key areas of technology investment for senior executives, Google can seize the opportunity to expand its capabilities in these areas,” he noted.

Google’s acquisition of Wiz could significantly improve Google Cloud’s market position, intensifying competition with AWS and Microsoft Azure. Industry analysts see the move as a strategic bet by Google on cybersecurity to gain market share in the growing cloud sector.

Advantage over rivals Microsoft and AWS

It is common knowledge that major cloud players such as Google, Microsoft, and Amazon are fighting fiercely for share in the cybersecurity market.

Amazon Web Services currently leads the cloud computing space with a 31 percent global market share as of Q1 2024. Microsoft is close behind with a 25 percent share and Google Cloud has an 11 percent share, according to industry reports.

Wedbush Securities analyst Dan Ives mentions in his notes to investors that this would be a shot in the arm for Google, as Microsoft and Amazon are making big bets on the cybersecurity space to complement their flagship GCP cloud offerings. This strategic move could give Google an edge in a variety of cloud deployments and help monetize the cybersecurity cloud sector, especially given that fewer than half of global workloads currently reside in the cloud, he said.

The acquisition of Wiz could significantly strengthen Google Cloud’s position in the market, allowing it to better compete with AWS and Microsoft Azure. While Microsoft has solid cybersecurity tools, its Azure cloud business has been subject to security breaches. Analyst Brad Zelnick of Deutsche Bank believes the acquisition of Wiz will demonstrate Google Cloud Platform’s commitment to multi-cloud and cybersecurity, potentially leading to increased market share.

While analysts stressed the importance of cloud cybersecurity and suggested Google could leverage Wiz’s potential to grab a bigger share of the industry, they also cautioned that any potential deal would likely face rigorous regulatory scrutiny.

The technology sector has seen a surge in mergers and acquisitions in recent months, with Synopsys’ purchase of Ansys for about $35 billion and Hewlett Packard Enterprise’s purchase of Juniper Networks for $14 billion both high-profile deals. According to financial markets platform Dealogic, technology M&As surged to account for the largest share in the first half of the year, up 42 percent year-over-year to $327.2 billion, with Google’s potential deal with Wiz contributing to that trend.