A to Z of Google‘s New Alphabet and why Google created it

Image Source: theguardian.com

Since long Google has been  holding the position of being one of the top leading tech giants in the technology world. Many of you must be aware of its versatile business set-up. In addition to its core search business, it has invented plethora of new products.

But recently there was a major breakthrough which took place in the history of Google – Larry Page the co-founder of Google announced on Monday August 10,  that the tech giant has  been recognised under new parent company known as Alphabet Inc. Larry signifies  Alphabet represent language, most important innovation by human and "essential element of indexing" in a Google Internet search. The biggest surprise about the same was the announcement of    the Indian-born Sundar Pichai, being appointed as the new CEO of Google. While the executive  in charge of Alphabet will be CEO Larry Page and co-founder Sergey Brin both leaders will  oversee a group of companies.

Alphabet will include the following companies – 

The largest of which is Google for sure, with no change in businesses and products i.e.: "Google Search, Maps, AdWords & AdSense, Applications, YouTube, Android and the related technical infrastructure are still operated by it."

And the other businesses which were working under Google, spinning off to work as a separate entity under Alphabet such as:

Calico: life-extension biotech research and development company whose mission is to harness advanced technologies.

Nest: Nest Labs manufactures  thermostat and other smart home products like smoke detectors, alarm and other security systems  

Other ventures such as Fiber, Google Ventures and Google Capital, Google X will be managed separately other from Google.

Larry Page explains why it introduces the umbrella company Alphabet in its blog. He says, it's designed to help other Google’s businesses to flourish outside of the search company and act as an individual entity. Each business will be led by skilled CEO of respective company and also supported by officials from adjacent market. Independently they can grow faster and with more new inventions. Simultaneously, Google can now concentrate  more on search and Internet-related businesses and new inventions instead of involving in long term projects like self-driving cars and drones, and other small projects like smart contact lenses and Google Glass .

But Questions raise in everybody’s mind why? And how Google can get benefit out of it?

According to experts, there are different reasons and lot of gossips why tech giant made this move, but the two main reasons are - To maintain better investment transparency on business and it will create proper management and more leadership opportunities for its people.

Since Google is there for around 20 years, and running in profit state till now but company structure is not properly organised due to number of different businesses under it. This frustrates the investors and it becomes difficult for management to streamline things  so it is not growing as rapidly as it used to do.

Let’s throw some light on what other people think about Alphabet:

1.Freedom of capital allotment on any business – From now things will be more independent. Now Management (Larry and Sergey) can freely allot substantial capital to any of the business they want. Earlier  situations were different when the different products and services  are under Google. Investment on particular business raised many questions like why to invest when it is not generating much revenue. But from now business will be handled with full freedom under each skilled CEO.

2.Maximize profit and reduce taxation: Under the new structure planning, Alphabet Inc. will be the holding company, it has no manufacturing set up, services or products of its own. Hence, it will not involve in any kind of business operation. This allows the company to maximise the profit and minimize taxation charge because if subsidiaries ownership is more than 80% the shares it gets are not taxed.

3.Risk mitigation: It means bear your own liabilities without involvement of other. In simple language if any company undergoing substantial losses than it has to bear it alone, no other company will bear any liability. Hence it separate the growth and revenue of individual business.

Therefore this new structure planning of Larry Page kept investors happy and also all the businesses under Alphabet are managed  effortlessly and properly by skilled and smart leaders. 

(Omnie Solutions is an enterprise application development company providing custom web and enterprise mobile application development services to global business. Omnie Solutions has extensive experience and expertise in app development for smart gadgets like Google Glass and smart watches. Follow Omnie Solutions on Facebook, LinkedIn, andTwitter for technology updates).