“I am Duncan MacLeod and I am immortal. In the end there can be only one!” Remember the Highlander movies and series? That was great stuff, wasn’t it? I caught it the other day on some late night cable channel and it got me thinking about the “cloud” of today. (Yes, I know – so my brain just happens to work that way.)
If you follow the cloud marketplace there is a lot of froth about Google finally looking like it intends to compete for market share and customers. It has new leadership, is holding its first cloud conference and announcing new enterprise customers. Meanwhile the swirl around Amazon Web Services (AWS), the market leader, is about news of major customers like Apple and Dropbox leaving them. You would think we are witnessing a major realignment of the cloud universe.
I don’t think so. Let’s step back and look at the players. A recent report places Google with about 4% of the market and AWS with over 31%. Gartner continues to state that AWS has ten times the capacity of the next fourteen competitors combined. These are staggering leadership positions. They reflect a phenomenon in today’s competitive world – winner takes all.
Look at the concentrations of leadership positions in just a few different market spaces: in social media – Facebook; in hospitality – Airbnb; in e-commerce – Amazon; in search – Google; in CRM – Salesforce; and in personal mobility – Uber. I would argue that we are seeing the same development in the cloud provider space with AWS the runaway leader.
There are lots of reasons why this is occurring. Some powerful forces influence the increasing digitization of our goods and services. A big part is due to the “network effect”. This is where the more users there are on the network – i.e. a particular service provider – the more valuable that network becomes to each user. In the cloud itself there is the additional effect of “data gravity”. Here, the more of your data you put into a particular cloud provider, the more valuable that provider becomes to you and the more you use them.
This is nothing new but today’s version is on steroids. Way back at the beginning, in the 1960’s, IBM came out with its Model 360 mainframe. It soon dominated the landscape to such an extent that observers took to calling it “IBM and the seven dwarfs”. Adding up all the other competitors didn’t come close to equaling IBM. This led to such habits as: “No one gets fired for buying IBM”.
Why is any of this important to you? Simply put, you buy cloud. Whether you buy it directly and have applications or new digital assets built for you, or you buy it indirectly by purchasing different software as a service (SaaS) applications that rest on an underlying cloud infrastructure (IaaS) – you are the buyer. And as the buyer you want to insure that you have a cloud provider that is reliable, feature rich and has plenty of resources to support you. After all, cloud infrastructure is an incredibly capital intensive game for the providers and subject to massive economies of scale – generally, the bigger you are, the better you are.
We have already watched many former cloud providers bail out. HP and the Telco’s have pretty much given up. Google is increasingly bringing a tough profit and loss perspective to its businesses other than search. It’s pretty clear that it intends to divests itself of the ones it feels won’t make it. Who is to say that won’t be the cloud IaaS in a couple of years. Just think about all that effort and investment you made to learn the Google platform – all gone.
Therefore, be cautious. In the end there may be only one.