Daily Archives: August 22, 2012
Thoughts on cloud IaaS market share
As part of our qualification survey for the cloud IaaS Magic Quadrant, we ask providers for detailed information about their revenue, provisioned capacity, and usage, under a very strict nondisclosure agreement. We treat this data with a healthy dose of skepticism (and we do our own models, channel-check, talk to contacts in the financial industry who’ve seen disclosures, and otherwise apply a filter of cynicism to it), but post-scrubbing, there are a number of very interesting data points that come out of the aggregated whole.
Three teasers:
Growth is huge, but is disproportionately concentrated on a modest number of vendors. Obviously, everyone knows that Amazon is a behemoth, but among the other vendors, there are stark differences in growth. Obviously, some small vendors post huge growth on a percentage basis (we went from $100k to $2m! yay!) so raw percentages aren’t the right way to look at this. Instead, what’s interesting is relative market share once you eliminate Amazon from the numbers. The data suggests that to succeed in this market, you have two possible routes — you have a giant sales channel with a ton of feet on the street and existing relationships, or you have excellent online marketing and instant online sign-ups. A third possible route is that you make it easy for people to white-label and resell your service.
Most vendors are still not at scale. Despite huge growth, most vendors remain under $10 million in revenue, and even the club above $20 million in revenue in pure public cloud IaaS revenue is only 20-odd vendors. Even that club is often still at a scale where Amazon could probably casually provide that as spot capacity in one AZ. By market share, Amazon is a de facto monopoly, although this market doesn’t have the characteristics of monopoly markets; the sheer number of competing vendors and the early stage of the market suggest shake-ups to come.
Customers love dedicated compute nodes. An increasing number of vendors offer dedicated compute nodes — i.e., a guarantee that a customer’s VMs won’t share a physical server with another customer’s VMs. That can be done on temporarily-dedicated hardware (like Amazon’s Dedicated Instances) or on an allocation of hardware that’s contractually the customer’s for a lengthier period of time (often a dedicated-blade option for vCloud Powered providers). For most providers who offer this option, customers seem to overwhelmingly choose it over VMs on shared hosts, even though it represents a price premium. Note that in most of these cases, the network and storage are still shared, although vendors may label this “private cloud” nevertheless. (We believe Amazon’s DI to be an exception to this, by the way, due to its very high price premium, especially for small numbers of instances; this is an effect of DIs being spread out over many servers rather than consolidated, like other providers do it.)
Vendors, Magic Quadrants, and client status
I’m writing this blog post for vendors who are in Magic Quadrants or who are hoping to be in Magic Quadrants, as well as the Gartner account executives (AEs) who have such vendors as clients and prospects. It’s in lieu of having to send an email blast to a lot of people; since it’s more generic than just my own Magic Quadrants, here it is for the world.
So, to sum up:
Whether or not a vendor is a Gartner client has no bearing on whether they are on a Magic Quadrant, or how they are rated. Vendors should therefore refrain from attempting to use pressure tactics on Gartner AEs, and Gartner AEs should be careful to avoid even the appearance of impropriety in dealing with vendors in a Magic Quadrant context. Vendors should conduct Magic Quadrant communications directly, using the contact information they were given.
And here’s the deeper dive:
Vendors, you’ve been given contact info for a reason. Please use it. As part of the process, every vendor being considered for an MQ is given points of contact — generally an admin coordinator as well as one or more of the analysts involved in the MQ. You’re told who you should go to if you have questions or issues — often the coordinator, lead analyst, or some specific analyst designated as your point of contact (POC). You should communicate directly with the POC. Do not go through your Gartner AE, other analysts that you deal with, or otherwise attempt to have a third party relay your concerns. Also, communicate via the contact you designated as the responsible party within your organization; we cannot, for instance, work with your PR firm. Gartner has a strict process that governs MQ-related communications; we ask that you do this so that we can ensure that all conversations are documented, and that your message is clearly and directly heard.
Yes, we mean it. Please contact us with questions and issues. If you’ve read everything available to you (the official communications, the Gartner documentation on how MQs work, any URLs you were given, and so on), and it doesn’t answer your question, please reach out to us. If you have an issue, please let us know. The analyst is the authoritative source. Anything you hear from anyone else isn’t. Gartner AEs don’t have any kind of privileged knowledge about the process, so don’t depend on them for information.
A vendor’s client relationship is of no relevance. The analysts do not care if a vendor is a client, how big of a client they are, whether they’re going to buy reprints if they get a certain placement, will become a client if they’re included on the MQ, or about any other attempt to throw their weight around. Vendors who try to do so are likely to be laughed at. Gartner AEs who try to advocate on behalf of their clients will annoy the analyst, and if it doesn’t cease, strongly risk having the analyst complain about them to the Ombudsman. In general, analysts prefer not to even know about what issues an AE might be having that may in some way be impacted by the MQ. It may even backfire, as the analyst’s desire to avoid any appearance of impropriety may lead to much closer scrutiny of any positive statements made about that vendor.
In short: Vendors shouldn’t try to go through Gartner Sales to communicate with the analysts involved in a Magic Quadrant. The right way to do this is direct, via the designated contacts. I know it’s natural to go to someone whom you may feel is better able to plead your case or tell you how they think you can best deal with the analyst, but please avoid the urge, unless you really just want a sounding board and not a relay. If you want to talk, get in touch.
CloudPundit: Massive-Scale Computing 