Corporate Musical Chairs: Google Creates New Parent Company Alphabet

by Matt Klassen on August 12, 2015

Alphabet is likely the largest company you’ve never heard of, and that’s because it was officially unveiled to the world on Monday when Google announced a significant corporate restructuring. According to a blog post by Google co-founded Larry Page, the company is looking to streamline its operations, making things “cleaner and more accountable,” and so Page, fellow co-founder Sergey Brin and former Google boss Eric Schmidt have created Alphabet Inc., the new parent company of Google Inc.

While there is some significant corporate musical chairs involved in this shuffle, when its all done Google will become a wholly-owned subsidiary of Alphabet, meaning that while Google will still stand as one of the world’s largest companies, Alphabet will be just a little bigger still.

So what is Alphabet? Page offers this succinct answer: “Alphabet is mostly a collection of companies.” The company is being created to better manage Google’s ever-diversifying portfolio of subsidiary interests, ones that range from Google X, its research and development arm, to Calico, the company’s life extension program, and will likely have no impact on the user experience of Google’s, or should I say Alphabet’s, wide breadth of products and services.

At first blush it may seem little more than a name change for one’s of the world’s most recognizable brands, but under the surface things are significantly more complicated. In fact, Google will first have to create Alphabet as its own subsidiary, whereafter Alphabet will create its own subsidiary that will merge with Google Inc., thus making Alphabet the parent company of Google and all its holdings. A tidy little corporate shuffle that will give each of Google’s subsidiary companies more freedom and flexibility to operate on their own, out from under the Google moniker.

But the real reason behind the creation of Alphabet is that Google has become a bit of a mixed bag itself over these last few years, a veritable alphabet soup of projects, moon shots, and various tangential endeavours. The company not only operates its iconic search engine (where this all started), but now offers a host of standalone services like Gmail, Google Earth, its Chrome browser, and Google Maps.

Not stopping there though, the company also owns YouTube, a tangential endeavour if there ever was one, as well as Nest, offering web-connected home systems, Google X, where all the fun happens, and, as mentioned, Calico, the company’s life extension subsidiary. Let’s not forget, though, that Google also owns Android, the most widely deployed mobile operating system in the world.

All that to say, Google is an alphabet soup already, calling it Alphabet is simply a recognition of this current disparate reality. A is for Android, G is for Google and so on and so forth.

The need to create a separate parent company to oversee this mishmash is likely derived from the growth of these subsidiaries, as each corporate division will likely now become their own standalone subsidiaries, operating somewhat independently within the newly created Alphabet ecosystem, with Google Inc. itself being one of these subsidiaries (with former Android boss Sundar Pichai as its new CEO).

Now this does raise questions of why Google would undertake such an absurdly complicated method of restructuring, instead of simply renaming the company for instance, leading many to speculate that there’s much more than meets the eye with this round of corporate musical chairs.

In the end, the old Google really isn’t going anywhere, and users will see no change in the service or external operations of the company. The changes, and the subsequent confusion surrounding such a popular name like “Alphabet,” will come behind the scenes, and if everything goes smoothly, that’s exactly where Alphabet Inc. wants to be.

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Written by: Matt Klassen. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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