New reports suggest that Google's parent company Alphabet wants every company under its umbrella to be more financially independent. This means that every Alphabet subsidiaries are required to pay corporate rates even if they are tapping the services of their fellow Alphabet subsidiary.
According to The Wall Street Journal, this new strategy is part of Alphabet's plan to increase accountability on each of its subsidiary companies. Alphabet executives want to make every company under its umbrella to be accountable for internal costs.
This means that companies like Google Fiber and Google X are free to create their own system for tasks like hiring employees. On the other hand, they can also use other Google services in order to complete a project as long as they are paying the regular market rate for such services.
Alphabet said that this increase transparency on its subsidiaries and help them establish their own internal systems. An example details that Nest has its own marketing and legal team. However, the company also rents computer services from Amazon which is a known rival to Google.
According to Engadget, this move should appeal to Wall Street investors who are worried that Alphabet is just burning money on subsidiaries and projects that do not put money on the table. This will encourage each subsidiaries to pursue independence and stability without relying much of their resources on Alphabet.
This new strategy from Alphabet could spell trouble to some subsidiaries, especially those that are still in the middle of developmental phase and has yet to produce a marketable product, like Google X. In this regard, experts said that companies like Google X may receive a longer grace period before Alphabet will label them as financially viable and independent.