Continuing the ongoing debate about the Cloud IaaS and Web Hosting Magic Quadrant, Bob Warfield has made a blog post called “Gartner: The Cloud is Not a Contract“. I want to address a number of points he made in his post. I’m going to address them out of order, starting with the points that I think are of more general interest, and then going into some of the MQ-quibble-specific stuff.

Bob goes into detail about why customized contracts can destroy what a customer was hoping to get out of the cloud in the first place. Bob writes something that I agree with but want to nuance in a number of ways. He says: How do we avoid having a contract destroy Cloudness? This is simple: Never sign a contract with your Cloud provider that interferes with their ability to commoditize through scale, sharing, and automation of operations.

I think that a cloud provider has to make decisions about how much they’re willing to compromise the purity of their model — what that costs them versus what that gains them. This is a business decision; a provider is not wrong for compromising purity, any more than a provider is right for being totally pure. It’s a question of what you want your business to be, and you can obtain success along the full spectrum. A provider has to ensure that their stance on customization is consistent with who and what they are, and they may also have to consider the trade off between short-term sales and long-term success.

Customers have to be educated that customization costs them more and may actually lower their quality of the service they receive, because part of the way that cloud providers drive availability is by driving repeatability. Similarly, the less you share, the more you pay. (These points are usually called out in gigantic bold caps in my conference presentations.) The cloud creates some harder choices for customers, because the cloud forces IT buyers to confront what “having it your way” is costing them, and will cost them in the future. The cloud is not, as it were, Burger King. The ability to take advantage of commodity cloud services will be a key factor in IT efficiency going forward.

But I believe that customers will continue to make choices along that spectrum. Most of them will walk into decisions with open eyes, and some will decide to sacrifice cost for customization. They are doing this today, and they will continue to do it. Importantly, they are segmenting their IT portfolios and consciously deciding what they can commoditize and what they can’t. Some will be better at embracing Smart Control than others, but ultimately, the most successful IT managers will be the ones who be the ones that manage IT to business goals. They are looking for cloud solutions that fit those goals, and many of those solutions are impure.

A significant percentage of my job is helping an IT buyer client talk through his requirements, challenging the reasoning for those requirements, explaining to him what his options are, and what vendors are likely to be good shortlist candidates — but also noting explicitly where his choices are preventing him from deriving greater value. I want him to consciously understand the trade-offs that he’s making, both short-term and long-term. And it’s also critical to understand their expectations of the future, so they can be advised on how to get there from here. Most organizations will transform gradually, not immediately or radically.

Bob wrote: The easy thing is to cave to your clients since they’re paying the bills and concoct a scenario where the clients get what they think they want. The hard thing is to show some leadership, earn your fees, and explain to the client, or at least to the vendors slighted, why your recommendation is right.

It is critical to understand that the MQ shows how vendors map in an overall market, which, as this MQ is titled, is, “Cloud IaaS and Web Hosting”, an impure market. As we repeatedly tell people, you should choose a solution that fits your use case — your technical and business needs. You should not read the MQ as saying that we don’t recommend Amazon (or other pure-plays) to clients. We recommend them plenty. And in fact, the MQ strengths text for Amazon is highly complimentary. (It starts with “Amazon is a thought leader; it is extraordinarily innovative, exceptionally agile and very responsive to the market. It has the richest cloud IaaS product portfolio, and is constantly expanding its service offerings and reducing its prices.” When I presented that bit of writing to my peers, some people thought it sounded too effusive for the usual Gartner tone of neutral objectivity!)

Any Gartner client trying to make a decision about the cloud is entitled to make an inquiry, and we’re happy to dive into the details of what they’re looking for, tease out what they need, and help them choose something that will be right for them. I did more than a thousand client phone inquiries during 2010. That’s a lot of people; each one represents a sourcing decision, and that number doesn’t include my conference one-on-ones, roundtables, sales visits, email exchanges, and so forth. I’m pretty confident about what our clients want to buy because I’ve talked to an awful lot of them. Most of those conversations are conducted without reference to the MQ, although many clients do look at the MQ first, and come prepared with questions about specific vendors.

But my job isn’t to tell clients the benefits of an “objectively right” decision. I’m not in the business of telling him what he should want, although I can tell him what other companies do as a best practice. And frankly, clients don’t need me to tell them to go be more innovative. In most cases, they want to be able to venture boldly into the benefits of cloud computing, but there are many business and technical circumstances that they need to factor into their decision-making, and most have serious needs for risk mitigation. Ihave to help a client come to a decision that will work for him. He’s going to pay for it, he’s going to be the one defending it to his management, and he’s going to be the one who pays the price if it goes all pear-shaped. I wrote previously about our IT buyer audience, and my belief that my formal research writing should highly pragmatic for their needs, not a reflection of what I think the market should want, so I won’t go into that again here — see that post instead.

By the way, on Bob’s “you ought to explain to the vendors slighted” gripe: Every single vendor on the MQ was entitled to a phone call with me — it’s a mandatory Gartner courtesy extended to all participants, regardless of client status, when they receive a draft for their review. I had long conversations on the phone, as well as in email, with many vendors (regardless of placement), about the MQ, their own placements, and the placements of other vendors. I assure you that they understand why things are the way they are (even if they don’t necessarily agree).

Bob wrote: It is obvious and absurd not to rank Amazon Web Services at least among the leaders. If youre going to take that step, it’s a bold one, and needs to be expressed up front with no ambiguity and leading with a willingness to have a big discussion about it. Gartner didn’t do that either. They just presented their typical blah, blah, blah report.

As I explained in my earlier post about the MQ process, we don’t position vendors arbitrarily. We decide scoring criteria, and we score vendors on those criteria, and they come out where they come out. In this case, we looked at the resulting MQ and the placement of the pure-plays and decided we should do a mid-year update that focused on purely self-managed cloud IaaS, in addition to the Critical Capabilities note due to be published soon, which is also pure-play focused. (I think much will become clearer once the Critical Capabilities is out, and I wish we’d been able to publish them near-simultaneously.)

We do not call out commentary about specific vendors in a Magic Quadrant, as a matter of policy; the document follows a very strict format. However, we’re always happy to discuss anything we write with our clients. Moreover, even though Gartner considers social media engagement (whether blogging or otherwise) for analysts to be personal time and not actual work, I think I’ve been pretty thoroughly engaged with people in discussing the MQ both in the blogosphere and on Twitter (@cloudpundit). I’m not sure how Bob is concluding that there’s not a willingness to have a big discussion about it (although I am specifically refraining from going into detail on Amazon’s rating on my blog, since it is against Gartner policy to do so).

Simon Ellis over at LabSlice has posted a blog entry in which he notes that the recent Cloud IaaS and Web Hosting Magic Quadrant has, in his words, “an obvious bias towards delivering ‘enterprise’ cloud services“. He goes on to say, “Security, availability and professional services — Gartner is clearly responding to dot-points mentioned to them by the large corporates that consume their material. And I daresay that these companies may not be needing cloud IaaS, but just want to be part of the hype.”

I think his point is worth addressing, because it’s true that the MQ is written to an audience of such companies and is very explicit in the fact that we are rating enterprise-grade services, but not true that these companies just want to be part of the hype. That seems to be part of the confusion over what cloud IaaS is about, too. At Gartner, we’re excited by the whole consumerization-of-IT trend that intertwines with the cloud computing phenomenon. But we’re not writing for the individual dude, or the garage developers, or the rebels who want IT stuff without IT people. We’re writing for the corporate IT guy.

Our target audience for a Magic Quadrant is IT buyers — specifically, our end-user clients. They typically work in mid-sized businesses and large enterprises, but we also serve technology companies of all sizes. However, the typical IT buyer who uses this kind of research is the kind of person who turns to an analyst firm for help, which means that they are somewhat on the conservative and risk-averse side. It’s not that they’re not willing to be early adopters or to take risks, mind you. And they’ve embraced the cloud with a surprising enthusiasm. But they’re cautious. Our surveys and polls show that overwhelmingly, security is their top cloud concern, for instance — far and above anything else.

We expect that the IT buyer in our client audience is typically going to be sourcing cloud IaaS on behalf of his organization. He is not an individual developer looking to grab infrastructure with a credit card; in fact, he is probably somebody who is explicitly interested in preventing his developers from doing that. He might work for a start-up that’s looking for a cost-effective way to get infrastructure with no capex, but chances are he’s post-funding or post-revenue if his company can afford to be a Gartner client, so he he shares many so-called “enterprise” concerns — security, availability, performance, and so forth. Managed services options play into a lot of thinking, too — for established companies more in an “offload my hassle” way, and for start-ups more in a “I don’t have an operations team, really, so I’d like to deal with ops as little as possible” way. And yes, professional services can be a help — tons of our clients are head-scratching figuring out what’s the best way to move their infrastructure into the cloud.

Simon Ellis seems to think, from his blog post, that these corporate guys don’t actually need cloud, they just want to be a part of the hype. I think he’s wrong. The sheer number of actual sourcing discussions we’re having with our IT buyer clients — vendor short-listing, requirements, RFPs, contracts, etc. — make it very clear that they’re buying, right now. And they’re buying for real. Production websites / SaaS / etc., production “virtual data centers”, large-scale test-and-development virtual lab environments, cloud-based disaster recovery… This is real business, so to speak.

It’s not an overnight revolution. This is a transition. It usually represents only a portion of their overall IT infrastructure — usually a tiny percentage, although it grows over time. They usually don’t want to make any application changes in the process. They almost certainly aren’t designing to fail. Most of them aren’t building cloud-native apps — although an increasing number of them are beginning to deliberately try to build new applications with cloud-friendly design in mind. Few of them are really taking advantage of the on-demand infrastructure capabilities of the cloud. What they are doing, in other words, is not especially sexy. But they are spending money on the cloud, and that’s what matters in the market right now.

And so in the end, the Magic Quadrant is written to emphasize what we see our clients asking about right now. It’s not cloudy idealism, that’s for sure. And most deals contain some level of managed services, which is why there’s significant weighting on them in the Magic Quadrant. (Fully self-managed is nevertheless a crucial market segment that deserves its own MQ, later this year, although I think the interesting note there will turn out to be the upcoming Critical Capabilities, which is wholly focused on feature-set. Though it should be noted that even a cloud-only MQ is going to emphasize an enterprise-oriented feature-set, not a developer-centric one.)

When we were setting the evaluation criteria for this most recent MQ, we decided that the Execution axis would be wholly focused upon the things we were hearing our clients demand right now, and the Vision axis would be primarily focused upon where we thought cloud services would be going.

The immediate demands are probably most easily summed up as “improved agility at a comparable or lower cost, with no change to our applications, limited impact on IT operations, and limited risks to our business”. The ultimate compliment that one of our clients can give a cloud IaaS provider seems to be, “It works just like my virtualized infrastructure in my own data center, but it’s less hassle.” That’s what they say to each other at our end-user roundtables at conferences when they’re trying to convince non-adopters to adopt.

I’m a pragmatist in most of my published research. I think that as an analyst, it’s fun to prognosticate on the future, but ultimately, I’m cognizant that what ultimately pays my salary is an IT buyer coming to me for advice, and feeling afterwards like I helped him think through making the choice that was right for him. Not necessarily the ideal choice, almost certainly not the most forward-thinking choice, but the choice that would deliver the best results given the environment he has to deal with. Ditto for a vendor who comes to me for advice — I want to reflect what I think the market evolution will be and not what I think it should be.

I’m not here to cheerlead for the cloud. It doesn’t mean that I don’t believe in the promise of the cloud, or that I’m not interested in the segments of the market that aren’t represented by Gartner’s IT buyer clients (I’ve certainly been keeping an eye on developer-centric clouds, for instance), or that I don’t understand or believe in the fundamental transformations going on. But we’ve got to get there from here, and that’s doubly true when you’re talking to corporate buyers about what cloud-like stuff they want now.

I’ve already agreed that people would find it useful to see a Magic Quadrant that is focused solely on a particular segment of the market — “pure” cloud IaaS. That’s why we’re going to be doing one in the middle of this year, as I noted previously. It’s also why our upcoming Critical Capabilities note, which focuses solely on product features, is cloud-only. (A Magic Quadrant, on the other hand, is about overall markets, which means we factor in sales, marketing, etc. — it’s not about fitness for use, whereas the Critical Capabilities are.)

However, I still think it’s important to understand the inherent messiness of this market, which is why we currently have an MQ that covers not just cloud IaaS, but also the hosting market.

I’ve previously talked about how customers have different levels of desire for managed services with the cloud. In that blog post, I also touched on the difference between trying to source cloud for a single important application (or a tightly-related group of apps), and sourcing cloud for a bunch of multiple less-critical applications.

Customers who are trying to source cloud for a single important application are essentially looking at hosting; the cloud is offering them on-demand, elastic resources. That’s why cloud has impacted the hosting industry so strongly — people want the flexibility and agility, but it doesn’t change the fact that they have traditional hosting requirements. As always with hosting, customers run the gamut from those who just want infrastructure, to those who want it fully managed. Customers often don’t know what they want, either, as I described in a blog post a while back, called, “I’m thinking about using Amazon, IBM, or Rackspace…” — which is how you get a weird mix of vendors in an RFP, as a customer tries to explore the possibilities available to them.

Customers who are trying to source cloud for multiple, less-important applications — essentially, the first steps towards replacing a traditional data center with a cloud IaaS solution — have different needs. Their requirements are distinct, but many of the provider capabilities that are useful for hosting are also useful for delivering these solutions, which is why so many Web hosters have expanded into this market.

You can cross “single app or multiple app?” with “what level of managed services?” to derive a set of distinct market segments — in fact, I’m in the midst of writing a research note on market segmentation that does exactly that. I believe it’s still all one market, and that most providers will end up serving multiple segments of that market. I believe that all of those segments are important, not just the ones closest to the cloud pure-play model.

I think, as an analyst, that it can be tempting to follow only the most compelling, fast-growing, quickest-evolving pieces of a market — to get caught up in the excitement, so to speak. My IT buyer clients force me to be balanced, though, because they care about a lot more than just what’s hot. Clearly, right now, they need more help sourcing in specific segments, which is why we’re doing some narrower vendor ratings focused on a more “pure cloud” tilt — but that shouldn’t be taken as an indication that the other segments aren’t important.