Back at the end of August,
Gartner released their 2013 Magic Quadrant for Infrastructure-as-a-Service. The IaaS market is still a
very volatile and competitive market that’s growing steadily, so changes on the
relative positions of the market players are to be expected from one year to
the next, but the dominance that Amazon Web Services has displayed is simply
incredible, and raises some interesting questions related to the future
evolution of the cloud market as a whole.
According to Gartner, AWS today
has overwhelming market share. What do they mean by overwhelming? More than five
times the compute capacity than the aggregate total of the other providers
considered in the study. Not only that, but at the end of the report they state
that the gap between the share leader (AWS) and the others is widening due to
increasing customer expectations and the broadening of use cases. Are we headed
towards a one-player cloud computing market?
Dominance and market evolution
For the past years, the cloud
market has been very dynamic. We’ve consistently seen new players come into the
market, both in the form of traditional companies who launched cloud offerings
and entirely new companies that were built from the ground up to provide cloud
services. We’ve also seen the existing providers launch dozens of new services
and functionalities, cut prices, and generally evolve their services at a very
As one player starts to dominate
the market, we may see a decrease in evolution speed. Yes, AWS released a
record number of new features in 2012, and is on track to break that record in
2013, but what is their motivation to keep doing so once they have no-one to
compete against? And, perhaps more importantly, how does the emergence of a
dominant player affect the evolution of existing services? It is entirely
possible that the other players in the market may choose to focus on specific
market segments or niches, instead of trying to compete over the entire market.
Reduced competitive pressure will invariably lead to a slowdown in innovation.
And it’s not only innovation from
existing players that may slow down. As AWS becomes more dominant, entrance
barriers to the market become greater, making it harder for new companies to launch
their services and gain market traction. Furthermore, as existing AWS
capabilities become “what customers expect when looking for a cloud provider”, new
companies face an increasing challenge to enter the competition.
This is yet another interesting
aspect of AWS’s market dominance: it’s slowly becoming an unofficial standard
for cloud providers. As more and more companies migrate their systems to the AWS
cloud and start relying on AWS functionalities to run their applications, these
functionalities (and the APIs that give us access to them) become essential to
the day-to-day operation of these companies. This means that any competitor has
to replicate the same functionality, with APIs as similar as possible, in order
to keep potential customers from being locked-in to AWS due to a lack of
compatibility and functionality.
Beyond the market dominance
Regardless of the current
dominance that AWS is displaying of the IaaS market, the fact remains that this
market is highly competitive, and that the situation may change very fast. I
believe there are several concurrent trends that can have a large impact on how
the market evolves from now on. Two in particular come to mind. First, we have
the evolution of the hybrid cloud market: as companies seek to integrate public
cloud offerings with their existing infrastructure, this new market is starting
to grow faster. A company that gains a footing here could rapidly expand this
to a decent share of the public cloud market, since its clients are most likely
to stick with the same provider on both situations.
Second, we are starting to see a
move on the part of clients from the most basic IaaS services (computing, networking,
and storage resources) to higher level, PaaS-like services, such as
databases-as-a-service, queue and notification services, and so on. Unlike what
happens at the IaaS layer, the market for these services lends itself to a much
higher level of vendor lock-in, which means that companies have the opportunity
to capture customers much more effectively.
While Amazon’s surge to the lead
was perhaps the most important aspect of the Magic Quadrant, it also offers
plenty of additional data points and information on other cloud providers that
make it a worthwhile read. From details such as advantages and disadvantages of
each provider to recommended use cases, the report gives an excellent overview
of the top cloud providers operating in the IaaS space today.