Public Cloud Market Consolidation

11 August 2016 | By John Merryman

Referring to Gartner articles is par with your local physician looking up symptoms on Wikipedia, however in this case the image tells a story we see manifesting in the field of public cloud services.

Source: Gartner

We see a 2-horse race for the foreseeable future for public cloud IaaS services, between Microsoft Azure and Amazon Web Services. Based on broad exposure to industry activity, here is why we make this assertion:

  • Telco Brokerage Adoption: Telco/Operators transitioning to a brokerage model, reducing dependence on home-grown VMware/OpenStack cloud providers; This will have a significant down-stream effect on Traditional Tech who have profited handsomely on the back of billion-dollar write-offs over the last 5 years.
  • OpenStack: Is gaining a foothold in Telco Cloud with notable large-scale projects from AT&T and others in development globally; Otherwise, OpenStack is not generating meaningful revenues across Traditional Tech players. Huawei’s notable challenge to AWS is also Openstack based, but yet to be seen for value beyond selling on low-price.
  • Traditional Tech: Ditching Failed Cloud Offerings; Traditional Tech providers (IBM, HP, Cisco, Dell/EMC, etc.) consistently applied multiple cloud architectures (4-6 per company) to market, similar to throwing handfuls of spaghetti at the wall to see what sticks. In the end the market did not stick and a majority of legacy cloud offerings are likely to diminish as the industry now moves to consolidate and focus offerings in response to the public cloud impact on revenues. The HPE-Azure partnership is possibly a leading indicator of what's to come: joint leverage of AzureStack, Azure, and a nurture game for VMware legacy implementations. We also see a meaningful future for converged infrastructure, as long as Traditional Tech can stop confusing customers.
  • Google: Google's cloud compute service needs more differentiation than performance/cost, and we don't yet see the large-scale customer enablement and partner ecosystem forming for this provider, while AWS and Microsoft are both driving massive human capital investments in this space. In addition both providers are racing up the stack and across PaaS/SaaS horizons for differentiation.

For our customers, we can only advise what we practice. In our business we are maintaining currency with dominant on-premises technologies, and hedging our bets on an upskill path for AWS and Azure in parallel to associated automation technologies. 

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