Google recently shifted their Infrastructure as a Service (IaaS) offering, Compute Engine, into general availability meaning that it is now production ready. CIC covered this in a blog post along with our thoughts on the product in the context of the Cloud market.
By any figures the biggest player in that market is Amazon, and according to some by a very large margin. Any Cloud news tends to trigger a debate about the overall state of play and what the future holds for the various vendors (IBM, Microsoft, Google, HP, Fujitsu and so on). There is a weight of opinion that puts Amazon way out in front not just now but in the future. We question this thinking and see the future of Cloud somewhat differently.
More of a light shower cloud than a big storm
The truth is that despite the coverage and hype very few people have adopted Cloud either as a platform (PaaS) or an infrastructure. Sure, there has been a lot of usage amongst very small organisations such as start-ups and certain industries like digital agencies. But overall most people have tinkered or generally ignored it so far. Amongst larger organisations such as enterprise their nervousness about issues like security have meant either limited use of investment in private cloud rather than public. The issue of security is more one of perception than reality as most providers have taken steps to make Cloud a secure environment. An example is offering encryption where only the customer holds the key and so the provider could not access data even they wanted (or were asked by government) to do so.
Security is a big factor but a lack of maturity in the offerings is also an issue. DevOps for Cloud is still trailing behind what organisations expect and many products are built around small scale use. For example, Microsoft’s Azure continues to be very tied to MSDN accounts which belong to individual developers rather than organisations. For a while the vendors pushed PaaS offerings until it was clear that the work needed by developers to embrace PaaS was unacceptable to most and have now started heavily promoting IaaS. Virtual Machines in the cloud makes it easy to lift and shift legacy software into a cloud environment although the benefits are less than that of PaaS.
The lack of maturity and adoption means that the market overall is actually small. Major vendors talk about cloud being a billionaire dollar business to them but this is in context of a multi-trillion dollar IT industry. That makes Amazon a big fish in a small pond.
Haven’t we been here before?
I see a strong analogy in this situation with Netscape at the turn of the century. Internet usage back then was small and Netscape dominated the browser market. As overall usage grew new users chose Internet Explorer as their browser. Netscape did not so much lose users as it simply lost market share as the market grew around it. The same could be said for Blackberry more recently or even look at Apple and how its once dominant smartphone position has been eroded by Google.
Amazon should expect the same scenario to play out. Its current position is a result of being a trail blazer and offering cloud services before most of its competitors. The fact that Google is only now (almost 2014) releasing an IaaS product shows how behind others are. But the strong position created by being first to market should not be confused for guaranteed long term dominance. The cloud market will grow and the question is whether Amazon’s share will remain. Challenging for Amazon is that it is the competition who are growing the market. As Analysts we hear from IBM, Microsoft and Google about their clouds but Amazon remains largely silent. These vendors are also investing heavily in marketing of their Clouds, again not something we see much of from Amazon.
Vendors such as IBM and Microsoft are going to sell in to their existing customers of which they have many. Some say this is not true and that it is complacent of such companies to ignore the threat from Amazon and that Amazon are already an enterprise player. Again though I re-iterate that these customers are not buying into Cloud in any significant way right now. Whilst Amazon with its ease of use, low cost and developer familiarity makes it appealing as an option for playing with Cloud that is very different from long term, mission critical investment.
History tells us what the future holds
I am not critiquing the Amazon offering but rather its situation within the market. Amazon’s offering is a by-product of the infrastructure required to run its retail business. Amazon is after all a retailer and not a technology vendor. Its competition are born and bred software products and services companies with massive resources skilled and experienced in technology. Just consider the enormous R&D budgets of Microsoft and IBM. Consider also how these companies are able to beat-up on each other: IBM vs Microsoft, Microsoft vs Apple/Google, Apple vs Samsung/Google, Microsoft vs Sony and the list goes on. What chance therefore does a retailer stand against these tech giants over the long term?
I could be wrong but history and the odds suggests that against this type of competition and given that Amazon has its primary business to worry about its ability to hold market share is almost impossible. I know that it gets a lot of media coverage but it is worth noting that Amazon makes very little profit, if any. Instead its competitors make billions of dollars in profits, have massive cash reserves and invest billions back into their businesses. IBM have spent $6bn so far on their Cloud products and Google’s is based on their core infrastructure which receives constant investment.
Instead it is more likely that the market will grow and with it Amazon’s share will shrink. At what point in this scenario does Amazon decide that it needs to focus on its core retail business and drop its cloud business? It is not like they have the billions of dollars in the bank that Microsoft, IBM and Google have to invest in fighting this war. So whilst Amazon is a strong option for today it may not be such a great bet over the long haul.