The Cloud computing battle is well underway with tech giants battling to ensure they emerge with dominant market shares. How is this playing out?
- AWS is the leader in the public cloud IaaS market. They were first to market, made it super easy for developers to quickly deploy resources with their credit card, aggressively built out their service stack, and created a strong ecosystem – in the process creating a high growth business pegged at $4 – $5 billion. Playing catchup has been Google Cloud Platform, which includes its IaaS Google Compute Engine, and Microsoft Azure. Both are aggressively investing in and growing their cloud businesses, and today, the public cloud market is viewed as a battle between these three.
- The initial adoption of cloud computing was driven by line of business, developers and new Web apps. Now one of the large battle grounds is the Enterprise where all CIOs have a “cloud strategy”. Millions of dollars are at stake in this complex IT market, with traditional IT looking to gain control over their environments, which can sometimes be at odds with the need for speed and agility (cloud’s great benefits) demanded from LOB and developers. While there are different choices for enterprise cloud architectures, RightScale’s 2014 State of the Cloud Survey shows that hybrid and multi-cloud implementations are the main trend.
- In the Enterprise, there is much at stake, although unlike web businesses, this is not a winner take all market:
- On the public cloud front, the market will continue to converge around the big 3: AWS, Microsoft, and Google. Expect significant investment and innovation, continued price wars (2014 has seen aggressive price cutting), and each pursuing the Enterprise:
- Microsoft looks to be in a solid position with its significant installed based of Office 365, strong IT developer community, and from what I have heard, a credible hybrid offering. And cloud has now become the priority, with Satya Nadella’s “mobile first, cloud first” strategy
- Google’s strengths include its expertise in doing web-scale systems for years, a strong Android developer community, and expertise in Big Data analytics. On the flip side, how it goes about developing a robust enterprise channel and support capability along with building a strong ecosystem of partners, will be interesting to watch. The recent partnership with PwC around Google for Work apps and Cloud computing could be a sign of things to come
- AWS recently hired the former Dow Jones CIO, Stephen Orban, to lead their enterprise strategy. They also recognize the importance of the hybrid cloud. How AWS builds enterprise services and channel/support will be key in gaining share. It will also be interesting to see if AWS becomes more active in acquisitions, which so far have not played a significant role in building the business (AWS has made several minority investments including Acquia in August)
- The traditional infrastructure enterprise vendors have been aggressively building and buying their cloud capabilities:
- IBM spent $2 billion buying SoftLayer in June 2013, combining it with their hardware, software, and services to offer a hybrid cloud
- VMware rolled out vCloud Air (formerly VMWare Hybrid Cloud). They are obviously coming from a very strong position within the data center with their vSphere installed base. They have been aggressively building out data centers, building an ISV ecosystem, and coming to market with a value proposition centered around how easy it is for their existing Enterprise IT customers to move workloads between onsite data centers, private and public clouds
- EMC (through a series of acquisitions – see below) recently announced its hybrid cloud offering, currently running on many VMware components and interoperable with vCloud Air, Azure, and AWS . How this all plays out with VMware will be interesting to watch, as EMC will release Microsoft Cloud Computing and OpenStack versions in 2015, and shareholder Elliot pressing for separation of VMware from EMC
- HP announced its Helion portfolio of cloud products and services in May along with its commitment to spend $1 billion building out cloud services. Following a hybrid cloud strategy, it recently announced general availability for HP Helion OpenStack with Cloud Foundry, along with ISV and developer programs. In September, HP acquired Eucalyptus for a rumored price of < $100 million, which brings Marten Mickos (of MySql fame) to run their Cloud business
- Cisco has their Intercloud offering and announced buying MetaCloud, which uses OpenStack for private clouds
- Red Hat is in a race to become the distributor of choice for OpenStack environments (see below)
- Citrix cloud product is based on the open source CloudStack that came out of their Cloud.com acquisition a few years back. September, saw several key executives leave the company and a reorg, leading to speculation on the future direction of their cloud strategy
- And of course, the large application vendors are in the mix:
- While Salesforce has broadened its SaaS business from CRM to service, marketing, and new analytics and community clouds, a key strategic initiative is to become a significant platform player with its Salesforce 1 Platform (Force.com which they launched in 2007, Heroku, and the recently announced development framework, Lightning). Its community now numbers 1.8 million developers.
- Oracle’s Mark Hurd stated (at their Cloud Forum) that their goal is to be number one in the cloud promoting their fully integrated stack from infrastructure to applications, with middleware and database in between. Components include Database as a service (for any Oracle database or application), Weblogic Java PaaS, and IaaS. Oracle recently held their Openworld show which had more details on their Cloud strategy; Dennis Howlett has an analysis of the event
- SAP’s strategy is to focus on the upper layers of the stack with its HANA Cloud Platform. It recently announced a partnership with IBM which is supplying the IaaS layer (powered by SoftLayer) for SAP’s managed Cloud offering
This list is by no means comprehensive as there are many other vendors competing in the overall cloud market e.g. telcos: Verizon/Terramark, CenturyLink (Savvis), Ericsson, to hosting companies like Rackspace (who has moved away from commodity IaaS to managed services), to startups such as DigitalOcean which raised $37 million this year as it rapidly develops a particular niche in the IaaS market.
OpenStack – the open source OS
OpenStack, often referred to as the open source cloud OS or framework, has steadily grown in acceptance as traditional enterprise vendors have lined up behind the projects, although enterprise adoption and galvanizing developers are key challenges ahead. It will be interesting to see how Enterprise OpenStack projects evolve – will they mainly focuse on cloud native workloads (which IDC refers to as “3rd platform” apps) or move to support traditional Enterprise workloads which some suggest account for 80 – 90% of existing workloads?
Whatever approach, some of the larger vendors are building up their capabilities:
- One of OpenStack’s biggest contributors, Red Hat, is leading the charge in acquiring companies around OpenStack. In June, Red Hat, acquired eNovance an OpenStack integrator for Euro $70 million and earlier in the year, acquired Inktank ($170M) which provides the Ceph storage system. In Sept, it acquired FeedHenry a developer platform for mobile apps that provides a mobile backend capability for its PaaS OpenShift offering
- In early October, EMC announced its acquiring Cloudscaling Group for $50 million, another provider of OpenStack cloud solutions, and along with its acquisitions of TwinStrata, Maginatics and Spanning, has entered the hybrid cloud market. Cloudscaling will form the core for their Enterprise Hybrid Cloud OpenStack in 2105
- In September, Cisco announced its intent to acquire MetaCloud to provide it with capabilities to build private OpenStack clouds
And on the funding front, Mirantis just raised $100 million from Insight Ventures as a pure play OpenStack vendor (Dell, Red Hat, Ericsson, SAP and Intel are all investors), SwiftStack - building on top of OpenStack’s Swift object storage core, raised $16 million, and Blue Box raised $10 million to build OpenStack private clouds. Storm Ventures estimates that there are 63 startups offering OpenStack related products.
Expect more announcements from players to come out next week at the OpenStack Paris Summit.
Is PaaS a stand alone category?
The PaaS market, which IDC forecasts to be $14 billion by 2017, is less mature than the other two service markets, IaaS and SaaS. The PaaS market can be difficult to define, although Johan den Haan, CTO at Mendix provides a good framework for categorizing cloud platforms including PaaS.
PaaS solutions started in public clouds (e.g. Engine Yard and Heroku) attracting web developers, but less so Enterprises, in which Java and .Net languages dominate along with Enterprise IT requirements (policy, SLA management, etc). Other private PaaS vendors emerged, e.g. Apprenda which started out as a pure play .Net player, as well as open source initiatives like Pivotal’s Cloud Foundry (originally announced in 2011 by VMware’s Tod Nielsen who now runs Heroku) and Red Hat’s OpenShift.
New developments in the space include:
– Two year old startup, Apcera (founded by ex Cloud Foundry CTO) just released a policy driven platform to help deploy the diverse workloads found in Enterprise environments — and telco giant Ericsson acquired a majority stake in the company.
– The hot new technology in the space, which every major enterprise software infrastructure and cloud provider has jumped on, is open source Docker containers. These containers provide an abstraction layer on top of Linux containers and allow developers to build and run applications inside the containers, making cloud apps portable. Docker Inc, is the commercial company and has raised $65 million to-date.
There is though, and interesting question for the PaaS market – is it a stand-alone category with a bunch of independent vendors competing for market share, or is it just part of a broader integrated Cloud stack, dominated by the larger vendors? CloudBees recently shifted out of the broader PaaS market to support Jenkins (Continuous integration server) in addition to announcing a partnership with Pivotal’s CloudFoundry, and you can read their view of the PaaS market here.
Taken together, these changes demonstrate market consolidation, platform commoditization, a continued strength of on-prem solutions in the enterprise, and the important strategic leverage to be obtained by combining IaaS, PaaS and managed service offerings. Longer term, it calls into question whether there will even be a PaaS marketplace that is identifiable except by the most academic of distinctions. These are not trends we can ignore, particularly when we have a successful and growing business centered on Jenkins.
Interesting questions to ponder …..
The race is on to emerge with leading market shares in the Cloud computing market. AWS is in the lead but, as mentioned, this is not a winner take all market. Many moves will be made in the next few years. And just a few of the many interesting questions to ponder on……..
- How far up the stack will AWS go (in July, they announced Zocal a storage and sharing service and more announcements are expected at re:Invent) and what will be their key moves as they play in the enterprise?
- As the Hybrid cloud deployment model gains steam in the enterprise, what will be the dominant use cases? (eg disaster recovery, dev/test, storage?)
- Within the Enterprise, which traditional software vendors emerge as the market leaders….VMware, Red Hat, IBM, EMC, HP…..? Given their large installed base, will VMware dominant the hybrid cloud market?
- How will OpenStack community and projects evolve? How will OpenStack deployments play out in the Enterprise?
- Will Salesforce S1 become a dominant platform for enabling new business applications?
- Where and how will large Telcos play in the market as cloud providers?
- And the two obvious questions for venture investors – where do you place your bets in the current crop of Cloud startups and for new entrants, where is the white space to build the next substantial Cloud service?