Google Cloud has changed how it pays its salespeople, ripping a page out of the Oracle playbook (GOOG, GOOGL)

Google

• In July, Google Cloud changed how it compensates its sales employees by decreasing the base salary and increasing the bonus.
• This bonus-driven compensation method is similar to legacy software companies like SAP and Oracle. It’s a sign of the changing culture under Google Cloud CEO Thomas Kurian and global customer operations president Robert Enslin, who worked at Oracle and SAP, respectively.
• The reaction to this change was mixed because while the compensation is greater overall if employees receive their entire bonus, the regular paycheck is less.
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Google’s Cloud business revamped its sales team’s compensation, ratcheting up the incentives — and the pressure — to maximize sales, as CEO Thomas Kurian rips a page out of a playbook long favored at sales-driven software companies like Oracle and SAP.

The new compensation structure for employees in Google’s sales organization looks a lot like the way legacy enterprise companies like SAP and Oracle pay their sales folks, with incentives designed to reward rainmakers and weed out underperformers. Employees received a letter to sign about the new compensation plan in June, and the change took effect on July 1, sources familiar with the matter told Business Insider. 

Under the new system, salespeople will see their base salary reduced, while their potential quarterly bonus for hitting sales targets will increase.

The change comes as Google is aggressively moving to compete in the cloud business, a market dominated by Amazon Web Services and Microsoft. Google has said it plans to triple its Cloud salesforce, already one of the company’s biggest areas of headcount growth. 

According to one of the sources, Kurian told Google Cloud employees that Google Cloud has a five-year window to become "at least the number 2 cloud."

The Google Cloud sales organization is under Robert Enslin, president of global customer operations, who joined Google in April after eight years at SAP. It’s probably no accident that the new compensation model looks very similar to the way salespeople are paid at SAP. The aggressive sales culture and focus on commissions, is also hallmark of Oracle, where Kurian previously worked.

Business Insider reached out to Google Cloud for comment on this information. Google Cloud declined comment.

A five-year window

The percentage change in compensation varied depending on the role. A source familiar with the matter estimates that the salary was reduced 10%, while the bonus was increased more than 10%. 

Reception to the new compensation plan was fairly mixed, according to sources familiar with the matter. On one hand, if employees hit their quota and receive their entire bonus, their entire compensation will now be greater than it was before. But that means their regular paycheck is lighter — and they have to wait for the extra money, since the bonus is paid out quarterly. 

Others were concerned that Google Cloud’s culture is becoming more like that of SAP or Oracle.

Google Cloud’s leadership told employees the change was being made in order to align the company with the rest of the industry, according to a source familiar with the matter. 

At last quarter’s earnings call, Google CEO Sundar Pichai said Google Cloud plans to triple it salesforce over the next few years. Google has already hired 2,000 salespeople, one person told us. Since Google Cloud is hiring more salespeople, the partner and marketing organizations saw budget cuts of 50%-60% in February, a source said. 

Read more: Google revealed that its cloud business is on run rate of more than $8 billion, and it plans to triple the size of its salesforce

Currently, Google Cloud is working to increase its cloud market share and catch up to Microsoft and Amazon Web Services, both of which have long relationships with cloud customers in the enterprise. Last month, Google announced that its cloud business’ revenue would now amount to $8 billion if the current revenue rate was projected forward on an annualized basis.

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See Also:

• To prevent disasters like the Capital One hack from happening again, experts say Amazon Web Services could do more to protect customers from themselves
• Microsoft handed Amazon and Google a new reason to go after Microsoft customers, and they are doing so with gusto
• Here are 12 of the most important executives leading Oracle’s big push to take on Amazon, Microsoft, and Google in the cloud

SEE ALSO: NPM, a startup 11 million developers rely on, is tangled in a bitter cultural battle as it tries to actually make money

Source: Business Insider – rmchan@businessinsider.com (Rosalie Chan)