Alphabet Inc. (GOOGL) Earnings Call Transcript & Summary

Welcome, everyone, to a conversation between Bernd Leukert, the Chief Technology, Data and Innovation Officer at Deutsche Bank; and Rob Enslin, President of Global Customer Operations for Google Cloud. I'm Jennifer Courant. I'm the Chief Data Officer at Deutsche Bank, and I welcome you to this conversation. Some of the statements that Mr. Enslin may make today could be considered forward-looking. These statements involve a number of risks and uncertainties that could cause actual results to differ materially. Any forward statements that Mr. Enslin makes are based on assumptions as of today and Alphabet undertakes no obligation to update them. Please refer to Alphabet's most recent Form 10-K for a discussion of the risk factors that may affect its results.

Bernd, let's get started. Can you tell us what you expect out of the partnership with Google and why you chose them?

Sure. I think we have huge expectations and high ambitions in that strategic partnership. And let me start that it's simply, we want to create significant value for our customers, for our clients by becoming a cloud-based company in the financial industry. And Google will help Deutsche Bank to modernize the technology infrastructure but as well to modernize the way we work. And with that, I think harnessing and leveraging the Google Cloud technology will allow us to create new digital offerings in the engagements with our customers and let's say, a better opportunity to win permanently market share. And the partnership will not only drive cost savings, what some might assume, but also and this is probably the most important thing, increase revenue and with that, value through customer engagement that is fundamentally new for the financial service industry. So it will enable a cultural transformation for Deutsche Bank, which goes significantly beyond technology. And this is an entire mindset for our employees and we want to learn and engage a lot from the Google engineers. We want to jointly innovate and leverage leading-edge technologies which exist today but which Google will have in the pipeline going forward and then provide exciting opportunities for our talent. We want to be the most attractive financial service industry company on this planet. And I can share with you that since we announced the partnership, we see already a significant change on that. And now, Jen, you ask, why Google? I think I have to admit, this was not clear from the beginning. We started with a due diligence phase. We had a contest with several technology companies. And then at the end, it was the delivery capability, the partnership that Google has demonstrated across the entire proof-of-concept life cycle. We started with a few showcases and Google has permanently outperformed the others in terms of delivery, in terms of engagement and this in record time. Then the second important element was in terms of the leadership commitment from Rob, but I would say the entire Google leadership that was fundamental on how the leadership between the 2 companies have worked together, how we build a partnership and how each member of the leadership was essential in framing such a strategic partnership, which Deutsche Bank has never done before. And that was confirmed in many dialogues. And I would say the partnership was already present while we had the proof of concept. So we leveraged the skill, the capabilities and the competencies in our daily business while we were still in the evaluation phase, which was creating, I would say, a lot of trust and confidence that it's a perfect fit.

Thank you so much, Bernd. Rob, coming to you. We know that Google has a number of relationships with financial services companies. What do you see that are common requirements or needs in our industry with regard to cloud?

Yes. First, look, we're exceptionally grateful and proud of the partnership we have with Deutsche Bank and what we're going to do together in financial services and the innovation that we will bring to this industry, utilizing much of the technology that Google has. So really exceptionally proud to work with Bernd and Christian and the whole Deutsche Bank team. But when you look at 2 primary needs we see across financial services, it's the need to modernize the foundational technologies to drive efficiencies, scale, and move more quickly, faster, have speed, have access to new capabilities, unlock the value of data assets that most of these financial service institutions have locked up, leveraging cloud to drive business transformation. We are seeing many different forms of this, but generally, the needs are focused in 3 key areas: growing with existing customers, reach new ones as traditional distribution models are changing, being able to bring FSI products and capabilities to wherever customers are and provide richer and more personalized interactions; drive cost and operational efficiency to address the industry's expertise and expense pressures, eliminate paper, automate routine operations, drive more do-it-yourself capabilities and manage the risk and regulatory requirements. These are increasing for financial institutions, so we have to automate controls, leverage data to make better risk management decisions and speed up the risk and reporting process.

Thanks, Rob. Bernd, the contract for the partnership was signed in December last year. What has been achieved in these last 5 months?

Yes, only 5 months but it felt that the partnership is much longer. So we have built a lot of momentum. And we are building the cloud foundations with 20-plus application landing zones now live already. And the teams are developing design blueprints that we will reuse for other applications, migrating to GCP in the upcoming months and years. So we are not making the mistake some companies did on everybody just getting started and then there has to be a reset button pressed in order to have an efficient and scalable way of moving to the cloud. In addition, we have a full secure network connectivity between Deutsche Bank and GCP and the networks in Europe established. We have, as we speak, approximately 50 GCP services that we have hardened, that we have made available on the landing zones for secure consumption in the native environment on GCP. And we have also been testing Google's AI and machine learning capabilities. And of course, there is huge excitement to explore these capabilities in various areas. So in general, this reflects my core belief that the future of financial services will not be based on, let's say, integrated offerings only. And therefore, we will move away from a classic vendor model, which we have done for the last decades and move more into where we need, we want to buy ready-made solutions or ready-made services and rather move in that collaboration towards a strategic partnership. With Google as a leading technology company, we are convinced that we can conquer and we can co-innovate in the future in the financial service industries. And if we stay, Jen, on use cases, a large part of our audience are clients of the investment bank and the corporate bank, and there are really a couple of interesting use cases, a tremendous amount of opportunities. But we said we want to start with dedicated use cases. And an example here is asset-as-a-service, where in the past, I think we have sold our financial service capabilities to the CFO, to the treasurer of corporations. But now with the service enablement and the transformation of the business model of our customers, we want to embed our financial services into the business model. And what is the new thing when customers are transitioning from selling products towards offering outcome, which is the service the product gives, we want to be the financial ingredient in that capability. Another example is contextual banking, so an understanding of our customers very deeply through the understanding of the data. So the ability to create a platform that enables our corporate clients to manage their order-to-cash process much more efficiently, and again, of course, leveraging capabilities like machine learning. And through an application, they can gain access to their invoices, to their credit notes, to their debit notes, to their promotional efforts, to their available financing and then further enable them to make payments through one of various electronic payment options, and this is all available on an app at fingertip. And the platform will also enable our clients to manage their counterparty risk, which is getting more and more important, of course, through a built-in risk solution, where we feel we have a very strong advantage against many competitors. And finally, not to forget that it will allow us to bring together fintech companies with Deutsche Bank capabilities and offer a solution that is integrated, that is embedded, that is frictionless, again to the advantage of our clients. So a tremendous amount of opportunities.

No, absolutely, absolutely. I know it's very exciting not just internally but for all of our clients. Rob, that really brings us quite nicely into fintechs, and this year's conference has an additional focus on fintech companies. In your experience, how do you think the partnership can benefit from the expertise and innovation coming from the start-up community?

Yes, good question, and it's really good to see that the fintechs are part of this year's conference. Look, fintechs are keen to partner with financial institutions, banks and are rapidly developing strong focus areas of expertise around ML and AI. And they've been able to use it via the cloud and through open APIs, which will accelerate the bank's ability to innovate faster and work with best-in-class technology companies. I mean, this is really important. Many fintech start-ups offer machine learning platforms both already on Google Cloud, enabling banks to evolve relationships with their clients. If you take an example like a fintech ML-powered platform that can learn from de-identified customer data to accurately predict additional products and services, deepening the relationship between a bank and its clients or machine learning that allows this approach to achieve a high success rate in much less time than the required traditional manually supervised approaches, this is really key. The benefits of this approach, though, are bidirectional. So what I mean? Large banking institutions have a rich understanding of transactional data that is typically beyond the reach of fintech start-ups. Banks can provision synthetic data sets resembling actual customer data, providing fintech start-ups with better data on which to train these models. And this creates a flywheel effect, enabling both the bank, the fintech start-up to rapidly progress with each other's help. And this, I believe, adds tremendous value to your customers.