How to Win in Cloud Computing

And the winner is... 

OK, we're not there yet. But, it's becoming obvious that the cloud computing market is heating up: there's been some downward pressure on IaaS pricing because of the number of competitors and, more importantly, because of the competition between Amazon and Google. Of course, this is to be expected because Google is trying to steal market share and AWS is trying to protect its share. Can we expect the same in the SaaS market? Probably, given that there has been a proliferation of SaaS companies (cloudwashing aside, see my previous post) in the last couple of years,. But then, there doesn't seem to be an enormous amount of overlap in the types services offered (yet?) because of the variety of solutions that are available for conversion to SaaS so we may not see the same price pressure as in the IaaS market.

That said, I don't think that the winner will be decided by its implementation of IaaS: the winner will be decided by PaaS. The reason for this is that every successful business model has had a strong developer community. Consider that the same thing happened with browsers and operating systems, and is currently happening with smartphones: smartphone leaders have stronger developer communities while weaker/less popular smartphones have fewer; such is the difference between iPhone and Blackberry. Granted, the gap between iOS devices and BB devices has other reasons as well, the point is that if BB had a stronger developer community than the iPhone, it would have won out earlier and not have to jump through hoops like it's doing right now.

Mobile providers should really take the hint here. Telcos are fighting for mobile market share but haven't really clued in that what attracts customers is not the phones themselves because every carrier has roughly the same phones for sale. What's really attracting them is the cool factor of what they can do with those phones. If the carriers really wanted to attract customers, they'd open up development platforms/PaaS environments for developers to create apps for free and then, when the app goes live, charge the developers to host their apps or collect ad revenue in exchange for free hosting. Like AT&T has done. Instead, most telcos and mobile carriers, are ignoring the PaaS possibility and looking to commoditized services with slowly eroding margins, like cabled connectivity, or to be me-toos in an almost saturated IaaS market to help grow their business.

There is no doubt that AWS is leading the way with $3.8B revenues projected for 2013. This definitely defines a leader in the market and AWS is certainly running away with the IaaS market. But Amazon did not stop at IaaS. It created a constellation of products built around EC2 to facilitate developer adoption. And that is why AWS is way ahead in the market.

It remains to be seen whether competitors in the PaaS market can steal away market share from AWS:

• Will Microsoft's Azure software development kit for Windows Phone attract developers to Azure?
• Will ActiveState's deal with HP will help it gain traction?
• Will SalesForce's Force.com ever face any real competition?
• Will mobile providers ever wake up and smell the coffee?
• Or will the PaaS winner be the platform that integrates with AWS?

There are many more questions that we can list here, and certainly more than there are answers. Give it a year or two. Then we'll start to see some clear(er) patterns in the PaaS market.

The Great Cloud Divide

It has been interesting to watch the evolution of cloud computing over the past few years. It has morphed from the X-as-a-service model to include "cloud based services", those services that are offered in a hosted model; it has been extended, to cloudwash those services that don't even remotely qualify; and now it is showing signs of speciation in that major players are aligning to one flavour or another.

We are speaking, of course, about alignment on open source vs. proprietary software, one vendor vs. another and the alliances that interconnect or separate them.

Open sourcing one's software suite has been a proven method to increase the use of software and generate revenue through services. Typically, this has been done by offering a pared down version of the software and holding back some features for a paid premium version. Red Hat showed that this is a feasible business model and has come a long way since its early days to offer a free version and a supported version.

Interestingly, Citrix open sourced CloudStack and committed to continue development of CloudStack with the community on the open source version. The only supposed difference between CloudStack and CloudPlatform? The logo.

Citrix also partnered with AWS to "...seamlessly connect corporate data centres to Amazon Web Services..." and, given the fact that AWS also partnered with Eucalyptus, this is a safe bet that AWS is building a community around hybrid cloud deployments.

Now VMware has acquired Nicira, a virtual network infrastructure software vendor, who has strong ties to OpenStack. Is this VMware's response to Citrix's moves in cloud computing? VMware certainly does not appear to be making moves to open source vCloud Director so it would stand to reason that they would lean towards an open source competitor of CloudStack's to counter Citrix. It certainly seem that lines have been drawn in the sand.

In all of this kerfuffle, there have been questions about what AWS plans to do. As mentioned, AWS is banking on growing its business by reaching out to private cloud customers and integration of their provider's products. This much is obvious from the Eucalyptus and Citrix partnerships. Therefore the likely outcome is the status quo, one that would be favored by most. The other possible outcome is that AWS open sources its products. I don't pretend to know what outcome could possible look like but I suspect that the likelihood is fairly low given the revenue streams AWS has built over the years.

So, it appears we have serious competition between VMware and Citrix for all things cloud. At first blush, it appears that Citrix may have the upper hand by aligning itself with AWS "early on". It is probably only a matter of time before VMware makes similar moves.

Adding to this complexity, Microsoft and Cisco are in the wings looking to make a mark with their own products. Of the two Microsoft may be better positioned to gain market share against all comers due to the fact that it has a full suite of market leading products that are already offered in a SaaS model and that may be deliverable in a SaaS model in a private environment in the near future as well.