Google is partnering with oil giant Aramco to access Saudi Arabia’s $10 billion cloud market – CNBC

The Kingdom Tower, operated by Kingdom Holding, left, stands alongside the King Fahd highway, illuminated by the light trails of passing traffic, in Riyadh, Saudi Arabia, on Saturday, Jan. 9, 2016.

Waseem Obaidi| Bloomberg | Getty Images

Google will open a "cloud region" where it can provide its cloud services in Saudi Arabia via a joint venture with state-owned oil producer Saudi Aramco, as Covid-19 prompts a landmark acceleration in digital adoption across the Gulf.

"The collaboration taps into rapidly expanding cloud services demand in Saudi Arabia, which is forecast to reach a market opportunity up to $10 billion by 2030," Aramco said in a statement on Monday.

Aramco said the agreement with Google will deliver "high performance, low-latency cloud services to enterprise customers in Saudi Arabia" as warming relations in the region open the political space for U.S. technology companies to expand into the kingdom.

Google began negotiations with Saudi Arabia on the project in 2018, but talks reportedly stalled following the murder of journalist Jamal Khashoggi by state agents in the same year. Google Cloud is now moving ahead with plans to establish and operate a new cloud region in the kingdom. No financial terms were disclosed.

The technology agreement also shows Silicon Valley elites are comfortable doing public business with the regime, despite some concerns over Saudi Arabia's global role as an exporter of fossil fuels and its poor human rights record.

Google said its investment into Saudi Arabia will allow businesses to grow and scale their offerings in the kingdom. The deal also boosts its cloud computing business, which brings in more than $10 billion in annual revenue for its parent, Alphabet Inc.

Regional e-commerce firm Noon and social media platform Snap were named as customers.

"In order to deliver a positive user experience, it is important to put our infrastructure as close as possible to our customers," Karl D'Adamo, senior director for infrastructure at Snap Inc., said in a statement.

"With the new Google Cloud region in the Kingdom of Saudi Arabia, we will be able to securely deliver services to our nearby customers at higher speeds and with greater flexibility," Hisham Zarka, CTO and managing director at Noon said.

Google competes with Microsoft and Amazon in the growing cloud-computing market globally. Google currently operates in 24 regions with 73 availability zones, less than its primary competitors Microsoft Azure and market leader Amazon Web Services.

Amazon Web Services launched its first cloud region in the Middle East in Bahrain last year, servicing top tier local clients such as Emirati bank Emirates NBD and rideshare service Careem. Microsoft launched its offering in the United Arab Emirates around the same time, making Google a later entrant to the regional scene.

Saudi Arabia has been actively courting Silicon Valley, seeking foreign investment to bolster its ambitious Vision 2030 reform plans and diversify its oil-dependent economy. The kingdom already invests significantly in American technology firms via its Public Investment Fund.

The new infrastructure will accelerate Saudi Arabia's tech industry, which has one of the fastest-growing cloud adoption rates in the region, according to Oxford Business Group, which expects the new centers will boost usage further.

Skyline of Riyadh in Saudi Arabia.

Simon Dawson | Bloomberg | Getty Images

Saudi Arabia also marked a milestone last month following the crowning of the country's first tech unicorn. Saudi Arabia's STC Pay now plans to expand its financial services offering across the Gulf region, after achieving a billion-dollar "unicorn" valuation on the back of a deal with Western Union.

"The future of Saudi Arabia's business transformation and growth depends on its ability to successfully leverage cloud services," Ahmad Al Sa'adi, Aramco's senior vice president of technical services, said. It's thought the Google cloud solution would offer Saudi businesses increased access to artificial intelligence, smart analytics, data management, security and other Google services.

The growing tech ties in the Kingdom come amid reports Google was preparing to establish a fiber optic network that will connect Europe and India through Israel and Saudi Arabia. The project has the potential to link Saudi Arabia and Israel for the first time, in another sign of warming relations despite the two countries having no formal diplomatic ties.

The underwater cable project, called Blue Raman route, is said to be nearly 5,000 miles long and is expected to cost $400 million.

Saudi government authorities have not publicly given approval for the project. The Wall Street Journal, citing sources, said Google could seek support from telecom partners to finance the initiative and share infrastructure.

Google has also announced plans to launch a cloud computing center in Qatar, which has been subject to a regional blockade led by Saudi Arabia, the UAE, Bahrain and Egypt since 2017.

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Google is partnering with oil giant Aramco to access Saudi Arabia's $10 billion cloud market - CNBC