Demolition Derby

Cloud On-Ramp? Looks More Like Demolition Derby

Demolition DerbyWe’re being told that the cloud will dominate the future. However, in contrast to the gold or land rushes of the past, when everybody was simply looking for a piece of the action, cloud looks more like a demolition derby, with IT vendors and cloud service providers appearing to expend as much effort trying to crush their competitors as they do positioning themselves for success. Yes, there’s a lot of money at stake, but this latest development seems to be flying in the face of the recent trend towards inclusiveness and playing nice with other vendors.

Before getting to the current crop of cloud carnage, let’s take a quick look at just why there’s all this bad blood. IDC recently reported that in 2014 we’ll see every major player make big investments to scale up cloud. While worldwide IT spending will grow 5% to $2.1 trillion in 2014, cloud spending will surge by 25%, reaching over $100 billion.

By 2016 cloud computing will become the bulk of new IT spend, according to Gartner, and 2016 will be a defining year for cloud. Private cloud will begin to give way to hybrid cloud, and nearly half of large enterprises will have hybrid cloud deployments by the end of 2017.

Then there’s a Barclays study that proves that businesses are shifting away from their data centers, to the peril of many traditional providers. “We believe the deflationary impact from the cloud ($1 spent on cloud infrastructure actually results in several dollars coming out of other IT end-markets)”.

For the IBMs and HPs of the world, that can mean for every $1 of cloud revenue they book, they may lose $2 in traditional hardware and software business. While enterprise hardware and software sales are expected to take a big hit, IaaS revenue for providers such as Amazon Web Services will jump at an annual rate of 57 percent through 2016, reaching $10.2 billion in 2016, up from $2.9 billion in 2012.

Those are some of the latest reasons why the IT industry is in such turmoil. Here are a few recent examples of just how this turmoil is playing out.

As part of its cloud roadmap, IBM has publicly stated that 2014 will be a year of big announcements against top competitors such as Google, Amazon Web Services and Microsoft. Big Blue has invested more than $6 billion since 2007 in acquisitions to accelerate its cloud initiatives, and in October revealed a cloud revenue breakdown, showing an increase of more than 70% year to date as third-quarter revenue exceeded $1 billion when factoring in the SoftLayer purchase.

IBM may be the biggest enterprise IT vendor, but HP, the biggest IT vendor, just announced it was dropping Amazon EC2 API support, citing customer requests. The fact that AWS is the de facto standard for public cloud is a reality that sticks in the craw of HP, IBM, Rackspace and the rest of the known computing world.

Gigaom Research analyst Janakiram MSV took a dim view of all this. “Given HP Cloud’s dismal adoption rate, I don’t think this matters much to Amazon or the public cloud customers,” he said via email.

The debut (or at least taking off the beta label) of the Google Compute Engine could also result in some more competition for Amazon. “AWS and Google will hopefully goad each other into one-upsmanship, creating a virtuous cycle of introducing things that customers discover they love, thus creating user demand that pushes the market forward,” blogged Gartner’s Lydia Leong.

Industry executives say Google had drawn little interest since introducing Compute Engine last year. While interest has picked up more recently, Google still trails both Amazon and Microsoft’s Azure service in features and number of customers.

Google is “embarking on a significant multi-billion infrastructure-as-a-service opportunity,” analyst Colin Sebastian of R.W. Baird wrote. “Google is positioned to become the next large player in cloud services, with a robust platform of application, platform and infrastructure services, competing for an increasing share of the IT spending pie.”

Finally, Red Hat is OpenShifting into the cloud with the introduction of OpenShift Enterprise 2. Cloud and OpenShift GM Ashesh Badan said “PaaS (Platform as a Service) represents the fastest growing segment of cloud computing, and Red Hat offers the industry’s only full suite of open-source PaaS solutions for both public and private PaaS. OpenShift Enterprise 2 extends this leadership and delivers what users want — an application-driven enterprise — by making PaaS even easier to consume.”

The bottom line is you better fasten your seat belts and get ready for a rocky ride while the IT industry bashes and bangs their way cloudtopia.

Image credit: Gary Paulson (flickr)

About the author
Steve Wexler

Steve is a proficient IT journalist, editor, publisher, and marketing communications professional. For the past two-plus decades, he has worked for the world’s leading high-technology publishers. Currently a contributor to Network Computing, Steve has served as editor and reporter for the Canadian affiliates of IDG and CMP, as well as Ziff Davis and UBM in the U.S. His strong knowledge of computers and networking technology complement his understanding of what’s important to the builders, sellers and buyers of IT products and services.