That is a very salient observation. Of course if they did that they would lose people who would step out, start their own business and just rent Google's infrastructure, but as AWS has shown that could become a meaningful part of their annual return anyway.

I doubt it was lack of vision. For a long time, one of Google's most important competitive edges was it's efficient infrastructure. With AWS coming in and Google moving to become an AI company, data probably became a more serious competitive advantage and they started Google Cloud Project