Google Cloud buying Wiz will redefine relationships

The on-again, off-again deal between Google Cloud and Wiz has finally reached an apparent conclusion, with the third largest cloud service provider set to acquire one of the leading and fastest-growing cloud security vendors for US$32 billion in an all-cash transaction. This marks a significant uplift from Google’s unsuccessful US$23 billion bid in July 2024 and Wiz’s subsequent US$16 billion valuation after an employee tender later that year. It will also be the largest exit for an Israeli startup, more than doubling Intel’s US$15 billion deal for Mobileye in 2017, and the largest cybersecurity acquisition, surpassing Cisco’s US$28 billion purchase of Splunk in 2024. The deal is expected to close in 2026, subject to customary closing conditions, including regulatory approvals, which are a critical factor. A protracted regulatory process is expected due to the extended timeline and increased scrutiny of big tech firms, adding uncertainty to the deal’s completion.

Wiz’s rapid growth has been widely recognized. It became the fastest software vendor to reach US$100 million in ARR within 18 months as of August 2022. It scaled to US$500 million less than two years later and is projected to surpass US$1 billion within the next 12 months. It is currently the most funded pre-IPO cybersecurity vendor, having raised a total of US$2 billion across eight funding rounds with 20 investors. Wiz’s CEO, together with the company’s other co-founders, who previously founded another cloud security vendor, Adallom, and sold it to Microsoft in 2015, expressed a preference for pursuing an IPO rather than being acquired. But an IPO was increasingly unlikely in the short term, following the recent stock market correction, with the S&P 500 Index declining in early March to 10% below its record high from February.

A cybersecurity vendor and a hyperscaler

The move marks a shift in Google Cloud’s cybersecurity strategy, which has, so far, carefully navigated the balance between collaborating and competing with other cybersecurity vendors. Google Cloud has steadily expanded its own cybersecurity portfolio with the 2022 acquisitions of Siemplify for US$500 million and Mandiant for US$5.4 billion. These additions strengthened and complemented Chronicle (now Google Security Operations), which originated from its X projects lab in 2018 and was integrated into Google Cloud in 2019. It has established a partner ecosystem that has built practices specializing in advisory and delivery services of its security portfolio, including GSIs, such as Accenture, Deloitte Consulting, KPMG and TCS, as well as MSSPs, service providers and other large partners, such as Cyderes, EPAM Systems, SADA (Insight) and NTT Data.

Simultaneously, Google Cloud has built a cybersecurity vendor technology partner ecosystem that integrates with its platform to enhance the security of its cloud infrastructure services. But these go beyond just integrations, much like AWS’ model. For example, Palo Alto Networks announced a multi-year billion-dollar commitment to Google Cloud, designating it as its preferred provider of AI and infrastructure services. Other key vendors include Check Point, Cisco (including Splunk), CrowdStrike, Fortinet, Trend Micro, Wiz and Zscaler. These and other cybersecurity solutions are sold through Google Cloud Marketplace and, as of June 2024, can also be procured via Marketplace Channel Private Offers. This has contributed to a rapid increase in cybersecurity deals via the Marketplace. For instance, CrowdStrike reported it had signed over US$150 million in deal value in 2024, highlighting a promising start to its collaboration with Google Cloud.

Redefining relationships on both sides

The size of the purchase price, coupled with the 40% increase from Google Cloud’s previous bid eight months earlier, underscores the strategic value of acquiring Wiz to put cybersecurity at the core of its value proposition. Alphabet, Google Cloud’s parent company, is facing mounting pressure from investors to identify new avenues for growth. This scrutiny has intensified following its loss in a significant antitrust case in the US in August 2024, which challenged its dominance in online search. Cybersecurity, a sector that has consistently outperformed the broader technology industry in terms of growth, is a logical fit. The acquisition of Wiz enhances Google Cloud’s prospects of becoming one of the top five platforms projected by Canalys to dominate enterprise cybersecurity over the next decade. But the deal, if it closes, will disrupt key relationships that have shown promising signs of being successful.

Wiz was awarded AWS Marketplace Partner of the Year, alongside Okta, and Microsoft Commercial Marketplace Partner of the Year in 2024. Marketplace transactions account for most of Wiz’s business. Its status as an independent, cloud-agnostic vendor with a multi-cloud offering has been pivotal to its success, enabling it to build joint-go-to-market engagements with all major cloud service providers. This dynamic will change once Wiz becomes part of Google Cloud, even though it has committed to remain a multi-cloud vendor. Competitors are unlikely to continue offering the same level of investment and visibility to their partners and customers, as doing so would directly benefit a major rival in the cloud space. Wiz’s relationships with other cybersecurity vendors, such as Check Point, Cisco, CyberArk and Zscaler, are unlikely to be affected, as they will remain mutually beneficial.

The acquisition of Wiz will make Google Cloud more of a competitor to its key cybersecurity vendor partners, much like Microsoft’s model. While the leading cybersecurity vendors do collaborate with Microsoft at different levels, particularly with marketplace transactions, they often prioritize relationships with non-competing cloud service providers, such as AWS and Google Cloud. If the deal closes, Google Cloud’s relationships with these vendors will naturally change. Competitive tensions will increase, especially in cloud security, which is a key growth area for both CrowdStrike and Palo Alto Networks, among others. Managing these changes carefully will be vital to maintain strong alliances.