Moving to the cloud? Remember Studebaker, Hudson or Packard? Of course you don’t. They were crushed as the automobile industry consolidated into Detroit’s Big Three. So what? We are watching the same thing happening in cloud computing and the same lessons apply. Gartner points the way.
“Those who do not remember the past are condemned to repeat it” – George Santayana
Flash back to 1955. The Fortune 500 is launched. Since then the members have morphed radically – over 90% have changed since its inception. But, for 40 years, the rankings showed that individually owned cars ruled. In 1958, six of the top-10 companies sold cars or gasoline for cars. In 1998, five of the top 10 still sold cars or gasoline. These were the days of the “Detroit Big Three”.
But the upheaval continues and while GM and Ford still make it into the top ten, new companies representing the digital age are on the list and climbing rapidly. Cloud computing companies – an industry only ten or so years old – have rapidly entered the F500 tally. Amazon (#7), Microsoft (#30) and Google (#22) now represent a huge portion of the Dow’s total market value and are changing not only the face of the information technology industry but also the face of many other industries.
For the tradition IT players, cloud has turned out to be a fast moving disruption. Just three years ago IBM was #24 and now it is #34. These legacy companies have fought back with truckloads of market spin –“Cloud Washing” – desperate to hang on to customers. But in short order, even the consultants who are dependent on the legacy competitors have had to call the game. Gartner’s recent Magic Quadrant on real cloud – Infrastructure as a Service (IaaS) – has said the leaders are really only three: Amazon (AWS), Microsoft (Azure) and Google. See chart below.
What’s remarkable is last year’s version had a whole gaggle of niche players (Virtustream, CenturyLink, Joyent, Rackspace, Interoute, Fujitsu, Skytap and NTT) that have been eliminated.
Why are they gone? Because Gartner’s call is: “Customers now have high expectations from their cloud IaaS providers. They demand market-leading technical capabilities — depth and breadth of features, along with high availability, performance and security… They expect not only ‘hardware’ infrastructure features, but also management features, developer services and cloud software infrastructure services, including fully integrated PaaS capabilities.”
There are only three niche players left. Two are legacy providers desperate to spin their stories – IBM and Oracle. However, detailed analysis of their CAPEX shows that their spend is nowhere near the leaders. Can they be pictured as serious players? Will they even be on the list next year?
The third is Alibaba, the Chinese answer to Amazon. Maybe it’s a contender but there is the Chinese government’s insistence on access to your information and their lax attitude toward the primacy of intellectual property. Both raise the question of how far it can grow outside of China.
What’s the take away? Cloud is a big investment that commits you to a particular vendor’s approach for years to come. Selecting a cloud niche vendor today – even if it appeals to some special need you have – may be attractive now, but do you really want to bet your future on a Studebaker?