cloud computing market share – Cloud Computing Today

Recent years have witnessed a proliferation of analyses about the size and relative market share of vendors in the cloud computing space. According to a post in GigaOM, UBS Analysts estimate that “the total market for AWS-type services will be between $5-to-$6 billion in 2010 and will eventually grow to $15-to-$20 billion in 2014.” Gartner, meanwhile, estimates that the IaaS market will grow from $3.7 billion in 2010 to $10.5 billion in 2014. Forrester predicts that IaaS spending alone will increase from $2.9B, projected to grow to $5.85B by 2015 in their recent report, Sizing the Cloud, Understanding and Quantifying the Future of Cloud Computing.

The discrepancies between these estimates of the current and future state of the IaaS space illustrate some of the difficulties specific to quantifying cloud computing market share, many of which of derive from the following reasons:

• The plurality of cloud computing modalities renders calculations of market share complex. While it’s true that the terms IaaS, PaaS and SaaS remain powerful terms for understanding cloud computing deployments, vendors are increasingly offering more than one variation of the IaaS, PaaS and SaaS trinity. Amazon’s Elastic Beanstalk, for example, constitutes a PaaS offering from the largest IaaS vendor in the space. Meanwhile, Red Hat offers an IaaS product called CloudForms alongside a PaaS offering known as OpenShift. Moreover, analysts may choose to include or not include SaaS, PaaS or consulting services from cloud computing products in their estimation of cloud computing revenue.

• Vendors often refuse to disclose cloud computing revenues, especially if they are privately held or otherwise multi-tiered businesses wherein cloud revenue is miniscule in comparison to revenues from other services. Amazon Web Services constitutes the paradigmatic example, here, but the recent acquisitions of Terremark by Verizon and Savvis by CenturyLink may serve as further cases in point, though most reports suggest that both Terremark and Savvis will function as independent business units within their parent company with detailed revenue breakdowns.

• Within the first half of 2011, Dell, HP, IBM, Oracle, Red Hat, Apple, Go Daddy and Microsoft have made increased commitments to cloud computing deployments in ways that promise to significantly impact the existing market share balance.

• The global nature of cloud computing renders quantification of market share challenging because many U.S. cloud computing vendors operate transnationally in partnership with other channel partners that may or may not report revenue in a transparent fashion. Consider Joyent’s partnership with ClusterTech and Qihoo 360 Technologies in China, for example, in this regard.

Despite these methodological difficulties, we can make some definitive statements about vendor revenue. Consider the following revenue data points, for 2010:

1. IaaS
a. Amazon Web Services: $500–700 million
b. Rackspace: $100 million
c. Terremark: $37.5 million, prior to acquisition by Verizon
d. Savvis: $15.2 million, prior to acquisition by CenturyLink
e. Joyent: $10- 20 million

2. SaaS
a. Salesforce.com: $1.3 billion
b. NetSuite: $200 million
c. Rightnow: $200 million
d. SuccessFactors: $200 million
e. Taleo: $200 million

Revenue for PaaS in 2010 is difficult to locate and widely believed to be miniscule. But given the sheer number and heterogeneity of cloud computing vendors and deployments, these numbers represent little consolation for analysts and investors seeking to understand trends in the cloud computing universe. How will Apple’s iCloud fit into this equation, for example? What about Facebook and Google? In what way will Microsoft’s Office 365 change market share in the productivity software space? Part of the difficulty of estimating cloud market share, here, involves the lack of a common set of standards for measuring the size of cloud computing deployments, in addition to the challenges specific to locating data for annualized cloud based revenue per vendor. Until inter-operability standards emerge, analysts will need to develop new methods of imposing discipline and rigor on the conglomeration of cloud computing forms. Meanwhile, vendors and customers alike should push for inter-operability standards that facilitate apples to apples comparisons of cloud offerings from vendors across the globe.

2011 has been an extraordinary year for cloud computing so far. Amazon Web Services (AWS) set the pace with an aggressive roll-out of products such as Elastic Beanstalk, CloudFormation, Amazon Cloud Player and Amazon Cloud Drive. Just when AWS seemed poised to consolidate its first mover advantage with respect to cloud computing market share, the landscape exploded with a veritable feast of product offerings, business partnerships and acquisitions. Every month another Fortune 500 IT or telecommunications company throws its hat into the cloud computing ring: Dell’s vStart, Dell’s recent partnership with SAP, IBM’s SmartCloud, Apple’s iCloud and HP’s BladeSystem Matrix mark just some of the big names and brands that have entered the cloud computing dohyo, or sumo circle. The cast of new actors has rendered the cloud computing space painfully difficult for analysts to quantify for the purpose of understanding relative market share and growth within the industry. But within this bewildering sea of change, three industry trends have emerged that deserve attention:

1. Outages across the industry signal demand outweighs supply
Demand for cloud computing services has begun to outstrip supply to the point where vendor processes for guaranteeing system uptime have become increasingly challenged. The Amazon Web Services outage of 2011 was the most glaring example of a lack of effective, scalable processes for one of the world’s premier IaaS vendors, but 2011 has witnessed notable outages specific to Sony PlayStation, Twitter, Gmail and Google’s Blogger as well. Expect more outages and service disruptions until the industry fathoms the time to develop processes for delivering on 99.99% SLAs as opposed to merely promising them.

2. Early Consolidation vs. the Proliferation of New Entrants to the Market
The past five months have witnessed Verizon’s acquisition of Terremark, Time Warner Cable’s acquisition of NaviSite, CenturyLink’s acquisition of Savvis and rife speculation that Rackspace lies next on the totem pole of potential buyouts. In tandem with the finalization of these acquistions, a slew of other companies such as Appistry, CA Technologies, Engine Yard, Flexiant, GigaSpaces, RightScale and ThinkGrid have emerged on the landscape and promise to collectively cobble together a non-trivial slice of the market while potentially transforming into significant niche players themselves. Expect new entrants on the scene, particularly in the open source space that will increasingly complicate the IaaS market share dominance of AWS, Eucalyptus, Rackspace, GoGrid and Joyent. Consolidations will continue but the market is unlikely to congeal into a few dominant players for quite some time.

3. The Rise of Open Source Cloud Computing Solutions
Rackspace, Dell and Equinux’s launch of a demonstration environment of OpenStack promises to change the industry by enticing customers to consider toying with its open source platform for free while paying for consultative support services associated with cloud design and management. Meanwhile, Canonical’s decision to change the cloud computing provider for its Ubuntu Enterprise Cloud (UEC) offering from Eucalyptus to OpenStack testifies to the strength of OpenStack and conversely, underscores Eucalyptus’s challenge in defining its value proposition as an Amazon EC2 compatible open source IaaS platform. RedHat’s open source PaaS product called OpenShift marks another leading contender in the open source ring by virtue of its deployment flexibility across the Java, Python, PHP and Ruby environments. Expect that open source IaaS and PaaS offerings will become increasingly robust and scalable. If open source solutions can demonstrate reliable, high quality portability across platforms, the market for less portable, private sector IaaS and PaaS solutions is likely to shrink dramatically. The fortunes of OpenStack, OpenShift and the recently formed Open Virtualization Alliance merit a close watch, in particular.