Will Platform Wars Freeze the Enterprise IaaS Market? | Gaining Altitude in the Cloud

Posted On April 13, 2012

As we work with our clients to understand the implications of Next Generation IT technologies, it’s clear that large enterprise adoption of public cloud IaaS is progressing more slowly than other types of cloud services (e.g., SaaS, private cloud). When we ask ourselves “why,” we continue to come back to three critical issues:

  • Vision and reality gap – we continue to be impressed with the sophistication that many of our client IT executives have around how private, public and hybrid clouds can be used to fundamentally transform their IT infrastructures. They then talk to vendors and face the disappointing gap between the state of cloud technologies today and their expectations and requirements (legitimate or not).
  • Risk aversion – it’s one thing for a CIO to passively support their VP of Sales as they roll out Salesforce.com.  It’s quite another to own the decision to migrate critical IT workloads out of the data center to public cloud services. While early adopters are clearly out there experimenting with IaaS, don’t expect your typical Fortune 500 CIO to be eager to get on the diving board and jump in until they have to, or they feel it’s safe.
  • Market “noise” – just when CIOs think the drumbeat of vendor provider announcements around public, private and hybrid cloud offerings and standards can’t get any louder, someone dials it up a notch.  The noise (and uncertainty) is now being amplified even further by the emerging battle around enterprise cloud platforms / operating systems like vCloud and Open Stack (more on this later).

Certainly we’re finding that these issues are reflected in enterprise IaaS adoption patterns that are not quite what many in the enterprise CSP vendor community had hoped for at this point. Namely we’re seeing:

  • Enterprises growing cloud usage from the “inside out” – nearly all the activity we see in the enterprise market around cloud and infrastructure today is focused around private cloud pilots or full deployments (hosted or on-prem). Rather than experiment with cloud with public service providers, they’re opting to try the model internally first. Some call it “server-hugging,” others a reactive move to keep IT spend in house, and still others a rational response to the current state of technology and services.
  • Heavy reliance on proprietary enterprise IT vendors – despite their vision, promise and industry support, new open source platforms (and Eucalyptus) have seen limited adoption in enterprise private clouds. While OpenStack has had success with service providers, many CIOs don’t consider it ready for prime-time yet in their data centers. CloudStack has had more success, but enterprise deployments still likely number only in the double digits. Perhaps not surprisingly we see enterprise cloud deployments (private cloud) dominated by VMware and IBM.
  • Selective, incremental migration of targeted use cases – where we do see enterprise IT migrating to public cloud or hybrid infrastructure models is for very targeted or smaller scale, lower risk use cases. Examples include test / dev environments, backup and archival, websites and batch data analytics. IT is dipping their “toe in the water” with public cloud, and not feeling a compelling need to drive widescale transformation – yet.

So where are we headed?

In general, enterprises are obviously not comfortable with the current risk / return profile associated with public IaaS and hybrid cloud models. We believe one of the few levers that would pull both components of this ratio would be a cloud management platform that would enable true workload portability / interoperability and policy enforcement across private, public and hybrid models. Not surprisingly, competing enterprise cloud vendor platforms, standards and ecosystems are emerging around VMware, Open Stack and Amazon (and to a limited extent Microsoft) to address this market gap. Several major announcements over the past several weeks that have served both to partially clarify and muddy this evolving landscape at the same time include:

  • The Amazon / Eucalyptus announcement around extended  API compatibility for hybrid clouds
  • The Citrix announcement that they will be breaking away from Open Stack and open sourcing CloudStack to the Apache Software Foundation
  • HP’s announcement of the Converged Cloud portfolio of public, private and hybrid cloud offerings based on a “hardened” version of OpenStack and KVM.

Most major enterprise IT vendors are still hedging their bets and publicly keeping feet in multiple camps. With the marketing engines in overdrive it’s difficult to understand what commitments vendors are really at the end of the day making to the different platforms. In fact it’s quite instructive to take a look at who’s putting their money where their mouths are when it comes to open source efforts like Open Stack, not just in terms of sponsorship fees but also developer contributions.

Historically IT platform markets end up with a dominant leader and one to two credible challengers that end up with 2/3 to 3/4 of the market, with the remainder shared among niche players. When we take a look at the enterprise cloud operating system or management platform market, we don’t see why it would be any different here, though we’re obviously still a long, long way from the end game.

The critical question in our mind is: Is a cloud platform market shakeout required for enterprise adoption of IaaS to accelerate and hit the tipping point? If so, we could be waiting a long time.

What are your thoughts?

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