Google’s Newest Cloud Push

In one fell swoop, Google is reaching ever higher into the cloud.

As widely reported, the tech giant has inked a pact to buy software development firm Apigee Corp. for $625 million. For Google, the strategic aim is to bring more services for businesses via cloud-based communications.

For Apigee, which offers API analytics, API consoles and gateways, the deal — at $17.40 a share to be paid in cash — represents a 6.5 percent premium to the company’s common equity closing price as of Wednesday (Sept. 7). Not bad for a company that, not so long ago, was a busted IPO.

But the strategic merits of the deal, which is due to be finalized by the end of the year, bear closer scrutiny. Apigee’s platform is one designed to help companies keep track of and manage their APIs, and there’s a competitive urgency behind the deal, as Bloomberg noted on Thursday.

That’s because Google has to play a bit of catch-up when it comes to serving the enterprise, with a bead being drawn on competitors such as Microsoft and Amazon. The newswire said that Google has been at a bit of a disadvantage when it comes to selling public cloud computing products to enterprises. The deal also has the added benefit of bolstering Google’s own APIs, which let developers extract information from platforms such as YouTube and others to imbed in their own software. Apigee helps Google push further into the mobile space, as Apigee’s software and back-end services work with mobile and web-based applications.

The API management space is one that has been marked by consolidation, and Google comes up against firms as formidable as Oracle, IBM and CA. As quoted by Barron’s, RW Baird Analyst Colin Sebastian noted that Apigee remains among one of the few pure-play companies in the space. Google’s strategy, Sebastian said in a note to clients reiterating an “outperform” rating on Alphabet shares (with a $900 price target), could be to add “a valuable service to Google’s enterprise computing stack” and added that “we believe Apigee could also help Google increase its Iaas/PaaS penetration.” Bringing Apigee into its suite of offerings would allow Google to help bring enterprise firms to the cloud and adopt mobile apps.

In a statement detailing some of the intent behind the deal, Dianne Greene, who heads up Google’s cloud computing operations, said that firms “are moving beyond the traditional ways of communicating, like phone calls and visits, and instead are communicating programmatically through APIs.”

Google noted in a blog post that Apigee is present and being used by hundreds of firms, ranging from Walgreens to First Data. The market itself is a large one, said Google, as Forrester, a research firm, has estimated that U.S. companies will spend roughly $3 billion on API management solutions within four years.