Cloud IaaS market share and the developer-centric world

Bernard Golden recently wrote a CIO.com blog post in response to my announcement of Gartner’s 2013 Magic Quadrant for Cloud IaaS. He raised a number of good questions that I thought it would be useful to address. This is part 1 of my response. (See part 2 for more.)

(Broadly, as a matter of Gartner policy, analysts do not debate Magic Quadrant results in public, and so I will note here that I’m talking about the market, and not the MQ itself.)

Bernard: “Why is there such a distance between AWS’s offering and everyone else’s?”

In the Magic Quadrant, we rate not only the offering itself in its current state, but also a whole host of other criteria — the roadmap, the vendor’s track record, marketing, sales, etc. (You can go check out the MQ document itself for those details.) You should read the AWS dot positioning as not just indicating a good offering, but also that AWS has generally built itself into a market juggernaut. (Of course, AWS is still far from perfect, and depending on your needs, other providers might be a better fit.)

But Bernard’s question can be rephrased as, “Why does AWS have so much greater market share than everyone else?”

Two years ago, I wrote two blog posts that are particularly relevant here:

These posts were followed up wih two research notes (links are Gartner clients only):

I have been beating the “please don’t have contempt for developers” drum for a while now. (I phrase it as “contempt” because it was often very clear that developers were seen as lesser, not real buyers doing real things — merely ignoring developers would have been one thing, but contempt is another.) But it’s taken until this past year before most of the “enterprise class” vendors acknowledged the legitimacy of the power that developers now hold.

Many service providers held tight to the view espoused by their traditional IT operations clientele: AWS was too dangerous, it didn’t have sufficient infrastructure availability, it didn’t perform sufficiently well or with sufficient consistency, it didn’t have enough security, it didn’t have enough manageability, it didn’t have enough governance, it wasn’t based on VMware — and it didn’t look very much like an enterprise’s data center architecture. The viewpoint was that IT operations would continue to control purchases, implementations would be relatively small-scale and would be built on traditional enterprise technologies, and that AWS would never get to the point that they’d satisfy traditional IT operations folks.

What they didn’t count on was the fact that developers, and the business management that they ultimately serve, were going to forge on ahead without them. Or that AWS would steadily improve its service and the way it did business, in order to meet the needs of the traditional enterprise. (My colleagues in GTP — the Gartner division that was Burton Group — do a yearly evaluation of AWS’s suitability for the enterprise, and each year, AWS gets steadily, materially better. Clients: see the latest.)

Today, AWS’s sheer market share speaks for itself. And it is definitely not just single developers with a VM or two, start-ups, or non-mission-critical stuff. Through the incredible amount of inquiry we take at Gartner, we know how cloud IaaS buyers think, source, succeed, and sometimes suffer. And every day at Gartner, we talk to multiple AWS customers (or prospects considering their options, though many have already bought something on the click-through agreement). Most are traditional enterprises of the G2000 variety (including some of the largest companies in the world), but over the last year, AWS has finally cracked the mid-market by working with systems integrator partners. The projected spend levels are clearly increasing dramatically, the use cases are extremely broad, the workloads increasingly have sensitive data and regulatory compliance concerns, and customers are increasingly thinking of AWS as a strategic vendor.

(Now, as my colleagues who cover the traditional data center like to point out, the spend levels are still trivial compared to what these customers are spending on the rest of their data center IT, but I think what’s critical here is the shift in thinking about where they’ll put their money in the future, and their desire to pick a strategic vendor despite how relatively early-stage the market is.)

But put another way — it is not just that AWS advanced its offering, but it convinced the market that this is what they wanted to buy (or at least that it was a better option than the other offerings), despite the sometimes strange offering constructs. They essentially created demand in a new type of buyer — and they effectively defined the category. And because they’re almost always first to market with a feature — or the first to make the market broadly aware of that capability — they force nearly all of their competitors into playing catch-up and me-too.

That doesn’t mean that the IT operations buyer isn’t important, or that there aren’t an array of needs that AWS does not address well. But the vast majority of the dollars spent on cloud IaaS are much more heavily influenced by developer desires than by IT operations concerns — and that means that market share currently favors the providers who appeal to development organizations. That’s an ongoing secular trend — business leaders are currently heavily growth-focused, and therefore demanding lots of applications delivered as quickly as possible, and are willing to spend money and take greater risks in order to obtain greater agility.

This also doesn’t mean that the non-developer-centric service providers aren’t important. Most of them have woken up to the new sourcing pattern, and are trying to respond. But many of them are also older, established organizations, and they can only move so quickly. They also have the comfort of their existing revenue streams, which allow them the luxury of not needing to move so quickly. Many have been able to treat cloud IaaS as an extension of their managed services business. But they’re now facing the threat of systems integrators like Cognizant and Capgemini entering this space, combining application development and application management with managed services on a strategic cloud IaaS provider’s platform — at the moment, normally AWS. Nothing is safe from the broader market shift towards cloud computing.

As always, every individual customer’s situation is different from another’s, and the right thing to do (or the safe, mainstream thing to do) evolves through the years. Gartner is appropriately cautionary when it discusses such things with clients. This is a good time to mention that Magic Quadrant placement is NEVER a good reason to include or exclude a vendor from a short list. You need to choose the vendor that’s right for your use case, and that might be a Niche Player, or even a vendor that’s not on the MQ at all — and even though AWS has the highest overall placement, they might be completely unsuited to your use case.

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Posted on September 4, 2013, in Infrastructure and tagged , , , , , , . Bookmark the permalink. 143 Comments.

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