Thursday, December 15, 2011

The Cloud Marketplace

With the attention and publicity presently devoted to cloud computing it is important to grasp the importance of the cloud marketplace. Globally, the number of cloud firms has grown into thousands as existing computer services firms are changing to “cloud computing” as a more attractive label.

Worldwide public cloud spending is $89 billion in 2011, an annual increase of 20%. Nevertheless, that is only 6% of the total computing hardware, software and IT services costs. Though cloud spending is the fastest growing component of IT, it remains relatively minor at this time. (1)

The largest share of cloud computing is in Infrastructure-as-a-Service (IaaS). It has thirty major players, both pure-play outfits that provide pay-as-you- go, on-demand computing capacity, and those that are rising into the cloud from the traditional managed services by offering limited cloud features.

IaaS is a form of outsourcing computer processing for hired hosting. It includes network access, routing services and storage. The IaaS provider will generally provide the hardware and administrative services needed to store applications and will provide a platform for running applications. Scaling of bandwidth, memory and storage are generally included as a part of more sophisticated IaaS offerings. Vendors compete on performance and pricing.

The leading IaaS firms are: Amazon EC2; BlueLock vCloud; Enki Computing Utility; Enomaly Elastic Computing Platform; Flexiscale;  Force.com; GoGrid Cloud Hosting; Google App Engine; Iomart Hosting;  Joyent Cloud; Layered Tech; Microsoft Windows Azure; Nirvanix Storage Delivery Network; Rackspace Cloud; Terremark Enterprise Cloud; V-Cloud Enterprise; VMware vCloud. The dominant IaaS firm is Amazon EC2 that occupies close to half of this marketplace.

There are also at least forty platform-as-a-service (PaaS) providers who help developers build applications faster by including automatic features and functions that otherwise the customer would have to provide. PaaS is an environment provides operating-system level services for accessing hardware resources that are needed in a cloud and therefore can support applications with lesser involvement by customers.

The leading PaaS firms are often identical as the IaaS firms. The leading firms are: 3tera's AppLogic; Amazon EC2; Flexiscale; Force.com; Google App Engine; IBM CloudBurst; Intuit Partner Platform; Joyent Smart Platform;  LongJump; Microsoft Windows Azure; Morph Labs; Rackspace Cloud;  RighScale Cloud Management Platform; Terremark vCloud Express; Wolf Frameworks; Xen Cloud Platform.

At the top of the cloud hierarchy are software-as-a-service (SaaS) companies. There may be more than two thousand such firms. Individually they occupy only small shares of a small but rapidly growing market. For example, by far the largest SaaS player, the totally proprietary Salesforce.com, owns only 8.7% of the total SaaS market. Other big names – Amazon, Intuit, Cisco, Microsoft and Google - were all below 5% each. That leaves everyone with only tiny market shares today. The most likely pattern of the industry will be to develop a few large concentrations of computer processing power that will be supported with a many firms that have proprietary market knowledge.

The leading SaaS provider is Microsoft with license fees and .Net proprietary Office 365 (with e-mail, calendars, Word, Excel, PowerPoint, OneNote, SharePoint and Lync). The other leader is Google, with Google Apps as a cloud-based solution connecting with any device on any operating system and largely free of license charges (with e-mail, calendars, a word processor, presentations, drawings, a Website, collaboration features, chat, video storage plus access to over 100,000 applications). Both Microsoft and Google SaaS are Federal Information Security Management Act (FISMA) certified.

In all SaaS cloud applications uptime is critical. We have reliable information only about Gmail, which was up 99.984% of the time inclusive of scheduled downtime. This translates into an average of seven non-consecutive minutes of downtime per month. This compares favorably with commercial on-premise email that averages 3.8 hours of downtime per month.

SUMMARY
Cloud operations should be viewed as a rapidly emerging business. With its growth rates it will most likely become the dominant form of how firms will organize their IT operations. As the need for computing applications grows at a rate that is more rapid than for any other technology, the limits on adoption of cloud computing will be dictated by the lack of qualified personnel to enable the transition into a totally different way of organizing computing services.

In the next few years there will be a large shake out taking place because economies of scale in processing that favors large enterprises. However, the large provides will depend on support from many firms that have specialized knowledge for narrowly defined markets.

The technical capabilities for advancing into cloud computing are rapidly emerging and are largely available now. Therefore the limits on growth in the next ten years will be managerial and not technological. The roles of the Chief Information Officers will change from implementation of IT systems, which will be left to cloud computing firms, to organizing the integration of a diverse group of suppliers to support competitive improvements.


  (1) http://www.gartner.com/it/page.jsp?id=1735214

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