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The Tip of the Spear

So I caught an interesting Horses for Sources blog post via Twitter — Phil Fersht of HfS called out a blog post of ISG’s Stanton Jones discussing the Gartner Magic Quadrant for Managed Hosting that I published earlier this year.

Stanton Jones’s argument seems to be that analysts sit in ivory towers, theorizing about suppliers, and making broad general statements about the market, whereas sourcing consultants actually get down and dirty with clients who are buying stuff. He says, “Analyst research is not at the tip of the spear, where buying and selling is actually occurring.”

However, that’s not actually true at the end-user-focused research firms like Gartner and Forrester. As an analyst at Gartner, I can do over a thousand one-on-one (or one-on-client-team) interactions in a single year. Each of those interactions represents a client who is considering what to buy (or build), and then going through the procurement cycle. They’re short-listing vendors, writing RFPs, wanting to discuss RFP responses, negotiating contracts and prices. It is absolutely the tip of the spear, and critically, over the long term, you also get feedback from the client as to the success of their initiative, so you’re hopefully not throwing out advice that turns out to fail in the real world.

So yes, something like a Magic Quadrant provides broad, generic advice (although I do try to orient my advice towards specific use cases). But that’s all that written research can get you. However, nearly every Gartner client buys access to inquiry, so that they can get those one-on-one, freewheeling entirely-custom interactions — so they can say, this is my exact situation, and get to Stanton Jones’s “I’m a multinational company who wants a company that can support a transformational infrastructure sourcing initiative” and ask which of these vendors I’d recommend.

By the way, if a client asked that question, I’d tell them, “You don’t want a managed hoster for this. Try discussing this with our strategic sourcing analysts, or with our data center outsourcing analysts.” (And it’s not improbable that this would be caught at the level of our client services organization, which would look at that question and say, gosh, this doesn’t sound like managed hosting, maybe you’d like these other pieces of more appropriate research and a discussion with these other analysts instead. For negotiating that kind of deal, by the way, Gartner has a consulting division that can do it; analysts don’t do the kind of work they, or a competitor like TPI, do.)

One more note: If I published in an MQ the feedback, good bad and ugly, that I’ve gotten from clients using service providers “on the ground”, I would never ever actually be able to get the research out, because it would undoubtedly be caught in a zillion Ombudsman escalations from the vendors. But if you talk to me on an inquiry, I might very well tell you, “In the last six months, every customer I have talked to of Vendor X has been unhappy, which represents a big swing in their historical quality of customer service,” or even “Customers who use Vendor X for Use Case A are happy, but those who have Use Case B think they lack sufficient expertise with the technology”. Client inquiry volume at a big research house like Gartner gets you enough anecdotal data points to show you trends. Clients want the ground truth; that’s part of what they’re paying an analyst firm for.

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Wanted – Cloud IaaS Expert

Back in December, I blogged about five reasons you should work at Gartner with me, and I’ve pleased to announce that Doug Toombs (formerly of Tier 1 Research / 451 Group) has joined my team.

However, Ted Chamberlin, my long-time colleague, has decided he’d like a change of pace, and has just left us for the vendor universe, and so we’re now seeking to backfill someone into his job. You can find the formal job listing here: IaaS and Managed Hosting Analyst.

In plain language, this analyst is going to spend their time assisting our clients who are trying to adopt cloud IaaS and hosting (especially managed hosting) solutions. The ideal candidate is someone who has real-world expertise with building solutions using cloud IaaS (and preferably has tried multiple cloud IaaS offerings and can intelligently discuss the pros and cons of each), or has been involved in building a cloud IaaS offering for a service provider (and is knowledgeable about the competing offerings). They’re sharp technically but also understand the needs of the business — someone who is currently in an architect role, or is working for a cloud provider, is probably the most likely fit.

If this sounds like you, please get in touch with me — send a resume in email, or ask me privately for more information. (If you applied the last time around, please feel free to get in touch again; the requirements for this role are somewhat different.)

Introducing the new Magic Quadrant for Public Cloud IaaS

I’m happy to announce that the new Gartner Magic Quadrant for Public Cloud Infrastructure as a Service has been published. (Client-only link. Non-clients can read a reprint.)

This is a brand-new Magic Quadrant; our previous Magic Quadrant has essentially been split into two MQs, this new Public Cloud IaaS MQ that focuses on self-service, and an updated and more focused iteration of the previous MQ, focused on managed services, called the Managed Hosting and Cloud IaaS MQ.

It’s been a long and interesting and sometimes controversial journey. Threaded throughout this whole Magic Quadrant are the fundamental dichotomies of the market, like IT Operations vs. developer buyers, new applications vs. existing workloads, “virtualization plus” vs. the fundamental move towards programmatic infrastructure, and so forth. We’ve tried hard to focus on a pragmatic view of the immediate wants and needs of Gartner clients, which also reflect these dichotomies.

This is a Magic Quadrant unlike the ones we have historically done in our services research; it is focused upon capabilities and features, in a manner that is much more comparable to the way that we compare software companies, than it is to things like network services or managed hosting or data center outsourcing. This reflects that public cloud IaaS goes far beyond just self-service VMs, creating significant disparities in provider capabilities.

In fact, for this Magic Quadrant, we tried just about every provider hands-on, which is highly unusual for Gartner’s evaluation approach. However, because Gartner’s general philosophy isn’t to do the kind of lab evaluations that we consider to be the domain of journalists, the hands-on stuff was primarily to confirm that providers had particular features and the specifics of what they had, without having to constantly pepper them with questions. Consequently this also involved in reading a lot of documentation, community forums, etc. This wasn’t full-fledged serious trialing. (The expense of the trials was paid on my personal credit card. Fortunately, since this was the cloud, it amounted to less than $150 all told.)

However, like all Magic Quadrants, there’s a heavy emphasis on business factors and not just technology — we are evaluating the positions of companies in the market, which are a composite of many things not directly related to comparable functionality of the services.

Like other Magic Quadrants, this one is targeted at the typical Gartner client — a mid-market company or an enterprise, but also our many tech company clients who range from tiny start-ups to huge monoliths. We believe that cloud IaaS, including the public cloud, is being used to run not only new applications, but also existing workloads. We don’t believe that public cloud IaaS is only for apps written specifically for the cloud, and we certainly don’t believe that it’s only for start-ups or leading-edge companies. It’s a nascent market, yes, but companies can use it productively today as long as they’re thoughtful about their use cases and deployment approach. We also don’t believe that cloud IaaS is solely the province of mass-scale providers; multi-tenancy can be cost-effectively delivered on a relatively small scale, as long as most of the workloads are steady-state (which legacy workloads often are).

Service features, sales, and marketing are all impacted by the need to serve two different buying constituencies, IT Operations and developers. Because we believe that developers are the face of business buyers, though, we believe that addressing this audience is just as important as it is addressing the traditional IT Operations audience. We do, however, emphasize a fundamentally corporate audience — this is definitely not an MQ aimed at, say, an individual building an iPhone app, or even non-technology small businesses.

Nowhere are those dichotomies better illustrated than two of the Leaders in this MQ — Amazon Web Services and CSC. Amazon excels at addressing a developer audience and new applications; CSC excels at addressing a mid-market IT Operations audience on the path towards data center transformation and automation of IT operations management, by migrating to cloud IaaS. Both companies address audiences and use cases beyond that expertise, of course, but they have enormously different visions of their fundamental value proposition, that are both valid. (For those of you who are going, “CSC? Really?” — yes, really. And they’ve been quietly growing far faster than any other VMware-based provider, so for all you vendors out there, if they’re not on your competitive radar screen, they should be.)

Of course, this means that no single provider in the Magic Quadrant is a fantastic fit for all needs. Furthermore, the right provider is always dependent upon not just the actual technical needs, but also the business needs and corporate culture, like the way that the company likes to engage with its vendors, its appetite for risk, and its viewpoint on strategic vs. tactical vendors.

Gartner has asked its analysts not to debate published research in public (per our updated Public Web Participation policy), especially Magic Quadrants. Consequently, I’m willing to engage in a certain amount of conversation about this MQ in public, but I’m not going to get into the kinds of public debates that I got into last year.

If you have questions about the MQ or are looking for more detail than is in the text itself, I’m happy to discuss. If you’re a Gartner client, please schedule an inquiry. If you’re a journalist, please arrange a call through Gartner’s press office. Depending on the circumstances, I may also consider a discussion in email.

This was a fascinating Magic Quadrant to research and write, and within the limits of that “no public debates” restriction, I may end up blogging more about it in the future. Also, as this is a fast-moving market, we’re highly likely to target an update for the middle of next year.

Cloud IaaS is a lot more than just self-service VMs

One year ago, when we did our 2010 hosting/cloud Magic Quadrant, you were doing pretty well as a service provider if you had a bare-minimum cloud IaaS offering — a service in which customers could go in, push buttons and self-service provision and de-provision virtual machines. There were providers with more capabilities than that, but by and large, that was the baseline of an acceptable offering.

Today, a year later, that says, yup, you’ve got something — but that’s all. The market has moved on with astonishing speed. Bluntly, the feat of provisioning a VM is only so impressive, and doing it fast and well and with a minimum of customer heartache is now simply table stakes in the game.

If you really want to deliver value to a customer, as a service provider, you’ve got to be asking yourself what you can do to smooth the whole delivery chain of IT Operations management and everything the customer needs to build out their solution on your IaaS platform. That’s true whether your audience is developers, devops, or IT operations.

Think: Hierarchical management of users and resources, RBAC for both users and API keys, governance (showback/chargeback, quotas/budgets, leases, workflow-driven provisioning), monitoring (from resources to APM), auto-scaling (both horizontal and vertical), complex network configurations, multi-data-center replication, automated patch management, automated capabilities to support regulatory compliance needs, sophisticated service catalog capabilities that include full deployment templates and are coupled with on-demand software licensing, integration with third-party IT operations management tools… and that’s only the start.

If you are in the cloud IaaS business and you do not have an aggressive roadmap of new feature releases, you are going to be behind the eight-ball — and you should picture it as the kind of rolling boulder that chases Indiana Jones. It doesn’t matter whether your competitor is Amazon or one of the many providers in the VMware ecosystem. Software-defined infrastructure is a software business, and it moves at the speed of software. You don’t have to be Amazon and compete directly with their feature set, but you had better think about what value you can add that goes beyond getting VMs fast.

Managed Hosting and Cloud IaaS Magic Quadrant

We’re wrapping up our Public Cloud IaaS Magic Quadrant (the drafts will be going out for review today or tomorrow), and we’ve just formally initiated the Managed Hosting and Cloud IaaS Magic Quadrant. This new Magic Quadrant is the next update of last year’s Magic Quadrant for Cloud Infrastructure as a Service and Web Hosting.

Last year’s MQ mixed both managed hosting (whether on physical servers, multi-tenant virtualized “utility hosting” platforms, or cloud IaaS) as well as the various self-service cloud IaaS use cases. While it presented an overall market view, the diversity of the represented use cases meant that it was difficult to use the MQ for vendor selection.

Consequently, we added the Public Cloud IaaS MQ (covering self-service cloud IaaS), and retitled the old MQ to “Managed Hosting and Cloud IaaS” (covering managed hosting and managed cloud IaaS). They are going to be two dramatically different-looking MQs, with a very different vendor population.

The Managed Hosting and Cloud IaaS MQ covers:

  • Managed hosting on physical servers
  • Managed hosting on a utility hosting platform
  • Managed hosting on cloud IaaS
  • Managed hybrid hosting (blended delivery models)
  • Managed Cloud IaaS (at minimum, guest OS is provider-managed)

Both portions of the market are important now, and will continue to be important in the future, and we hope that having two Magic Quadrants will provide better clarity.

In cloud IaaS, developers are face of business buyers

I originally started writing this blog post before Forrester’s James Staten made a post called “Public Clouds Prove I&O Pros Are From Venus And Developers Are From Mars“, and reading made me change this post into a response to his, as well as covering the original point I wanted to make.

In his post, James argues that cloud IaaS offerings are generally either developer-centric or I&O-centric, which leads to an emphasis on either self-service or managed services, with different feature-set priorities. Broadly speaking, I don’t disagree with him, but I think there’s a crucial point that he’s missing (or at least doesn’t mention), that is critical for cloud IaaS providers to understand.

Namely, it’s this: Developers are the face of business buyers.

We can all agree, I’m sure, that self-service cloud IaaS of the Amazon variety has truly empowered developers at start-ups and small businesses, who previously didn’t have immediate access to cheap infrastructure. Sometimes these developers are simply using IaaS as a substitute for having to get hardware and colocation. Sometimes they’re taking advantage of the unique capabilities exposed by programmatic access to infrastructure. Sometimes they’re just writing simple Web apps the same way they always have. Sometimes they’re writing truly cloud-native applications. Sometimes they really need to match their capacity to their highly-variable needs. Sometimes they have steady-state infrastructure. You can’t generalize about them too broadly. But their reasons for using the cloud are pretty clear.

But what’s driving developers in well-established businesses, with IT Operations organizations that have virtualized infrastructure and maybe even private cloud, to put stuff in the public cloud?

It’s simple. They’ve asked for something and IT Operations can’t give it to them in the timeframe that they need. Or IT Operations is such a pain to deal with that they don’t even want to ask. (Yes, sometimes, they want programmatic infrastructure, have highly variable capacity needs, etc. Then they think like start-ups. But this is a tiny, tiny percentage of projects in traditional businesses, and even a small percentage of those that use cloud IaaS.)

And why do they want something? Well, it’s because the business has asked the applications development group to develop a thingy that does X, and the developer is trotting off to try to write X, only he can’t actually do that until IT Operations can give him a server on which to do X, and possibly some other stuff as well, like a load balancer.

So what happens is you get a developer who goes back to a business manager and says, “Well, I could deliver you the code for X in six weeks, except IT Operations tells me that they can’t get around to giving me a server for it for another three weeks.” (In some organizations, especially ones without effective virtualization, that can be months.) The business manager says, “That’s unacceptable. We can’t wait that long.” And the developer sighs and says, “Don’t worry about it. I’ll just take care of it.” And then some cloud IaaS provider, probably one who’s able to offer infrastructure, right now, gets a brand-new customer. This is what businesses mean when they talk about “agility” from the cloud.

Maybe the business has had this happen enough that Enterprise Architecture has led the evaluation of cloud IaaS providers, chosen one or more, set down guideliens for their use, and led the signing of some sort of master services agreement with those providers. Or maybe this is the first sign-up. Either way, developers are key to the decision-making.

When it comes to go into production, maybe IT Operations has its act together, and it comes back into the business’s data center. Maybe it has to move to another external provider — IT Operations has sourced something, or Enterprise Architecture has set a policy for where particular production workloads must run. So maybe it goes to traditional managed hosting, hybrid hosting, or a different cloud provider. Maybe it stays with the cloud the developer chose, though. There’s a lot to be said for incumbency.

But the key thing is this: In SaaS, business buyers are bypassing IT to get their own business needs met. In IaaS, business buyers are doing the same thing — it’s just that it’s the developer that is fronting the sourcing, and is therefore making the decision of when to go cloud and who to use when they do, at least initially.

So if you’re a cloud provider and you say, “We don’t serve individual developers” (which, in my experience, you’ll generally say with a sneer), you are basically saying, “We don’t care about the business buyer.” Which is a perfect valid sales strategy, but you should keep in mind that the business controls two-thirds of cloud spending (so IT Operations holds the purse-strings only a third of the time), according to Gartner’s surveys. You like money, don’t you?

There are many, many more nuances to this, of course (nuances to be explored in a research note for Gartner clients, naturally, because there’s only so much you get for free). But it leads to the conclusion that you must be able to sell to both developers and IT Operations, regardless of the nature of your offering, unless you really want to limit your market opportunity. And that means that the roadmaps of leading providers will be convergent to deliver the features needed by both constituencies.

Common service provider myths about cloud infrastructure

We’re currently in the midst of agenda planning for 2012, which is a fancy way to say that we’re trying to figure out what we’re going to write next year. Probably to the despair of my managers, I am almost totally a spontaneous writer, who sits down on a plane and happens to write a research note on whatever it is that’s occurred to me at the moment. So I’ve been pondering what to write, and decided that I ought to tap into the deep well of frustration I’ve been feeling about the cloud IaaS market over the last couple of months.

Specifically, it started me in on thinking about the most common fallacies that I hear from current cloud IaaS providers, or from vendors who are working on getting into the business. I think each of these things is worthy of a research note (in some cases, I’ve already written one), but they’re also worth a blog post series, because I have the occasional desire to explode in frustrated rants. Also, when I write research, it’s carefully polite, thoughtfully-considered, heavily-nuanced, peer-reviewed documents that will run ten to twenty pages and be vaguely skimmed, often by mid-level folks in product marketing. If I write a blog post, it will be short and pointed and might actually get the point through to people, especially the executives who are more likely to read my blog than my research.

So, here’s the succinct list to be explored in further posts. These are things I have said to vendor clients in inquiries, in politely measured terms. These are the blunt versions:

Doing this cloud infrastructure thing is hard and expensive. Yes, I know that VMware told you that you could just get a VCE Vblock, put VMware’s cloud stack on it (maybe with a little help from VMware consulting), and be in business. That’s not the case. You will be making a huge number of engineering decisions (most of which can screw you in a variety of colorful ways, either immediately or down the road). You will be integrating a ton of tools and doing a bunch of software development yourself, if you want to have a vaguely competitive offering for anything other than the small business migrating from VPS. Ditto if you use Citrix (Cloud.com), OpenStack, or whomever. Even with professional services to help you. And once you have an offering, you will be in a giant competitive rat race where the best players innovate fast, and the capabilities gap widens, not closes. If you’re not up to it, white-label, resell, or broker instead.

There is more to the competition than Amazon, but ignore Amazon at your peril. Sure, Amazon is the market goliath, but if your differentiation is “we’re not like Amazon, we’re enterprise-class!”, you’re now competing against te dozens of other providers who also thought that would be a clever market differentiation. Not to mention that Amazon already serves the enterprise, and wants to deepen its inroads. (Where Amazon is hurting is the mid-market, but there’s tons of competition there, too.) Do you seriously think that Amazon isn’t going to start introducing service features targeted at the enterprise? They already have, and they’re continuing to do so.

Not everything has to be engineered to five nines of availability. Many businesses, especially those moving legacy workloads, need reliable, consistently high-performance infrastructure. Howeve, most businesses shouldn’t get infrastructure as one-size-fits-all — this is part of what is making internal data centers expensive. Instead, cloud infrastructure should be tiered — one management portal, one API, multiple levels of service at different price points. “Everything we do is enterprise-class” unfortunately implies “everything we do is expensive”.

Your contempt for the individual developer hugely limits your sales opportunities. Developers are the face of the business buyer. They are the way that cloud IaaS makes inroads into traditional businesses, including the largest enterprises. This is not just about start-ups or small businesses, or about the companies going DevOps.

Prospective customers will not call Sales when your website is useless. Your lack of useful information on your website doesn’t mean that eager prospects will call sales wanting to know what wonderful things you have. Instead, they will assume that you suck, and you don’t get the cloud, and you are hiding what you have because it’s not actually competitive, and they will move on to the dozens of other providers trying to sell cloud IaaS or who are pretending to do so. Also, engineers hate talking to salespeople. Blind RFPs are common in this market, but so is simply signing up with a provider that doesn’t make it painful to get their service.

Just because you don’t take online sign-ups doesn’t mean your cloud is “safe”. Even if you only take “legitimate businesses”, customers make mistakes and their infrastructure gets compromised. Sure, your security controls might ensure that the bad guys don’t compromise your other customers. But that doesn’t mean you won’t end up hosting command-and-control for a botnet, scammers, or spammers, inadvertently. Service providers who take credit card sign-ups are professionally paranoid about these things; buyers should beware providers who think “only real businesses like you can use our cloud” means no bad guys inside the walls.

Automation, not people, is the future. Okay, you’re more of a “managed services” kind of company, and self-service isn’t really your thing. Except “managed services” are, today, basically a codeword for “expensive manual labor”. The real future value of cloud IaaS is automating the heck out of most of the lower-end managed services. If you don’t get on that bandwagon soon, you are going to eventually stop being cost-competitive — not to mention that automation means consistency and likely higher quality. There’s a future in having people still, but not for things that are better done by computers.

Carriers won’t dominate the cloud. This opinion is controversial. Of course, carriers will be pretty significant players — especially since they’ve been buying up the leading independent cloud IaaS providers. But many other analyst firms, and certainly the carriers themselves, believe that the network, and the ability to offer an end-to-end service, will be a key differentiator that allows carriers to dominate this business. But that’s not what customers actually want. They want private networking from their carrier that connects them to their infrastructure — which they can get out of a carrier-neutral data center that is a “cloud hub”. Customers are better off going into a cloud hub with a colocated “cloud gateway” (with security, WAN optimization, etc.), cross-connecting to their various cloud providers (whether IaaS, PaaS, SaaS, etc.), and taking one private network connection home.

Stay tuned. More to come.

What CenturyLink is Getting with Savvis

I scribbled off a quick blog post on the CenturyLink acquisition of Savvis but didn’t have time to delve into it in detail at the time. This is a bit of a follow-up.

Savvis has three core businesses:

  • Coloation: Savvis has carrier-diverse (though not strictly-speaking carrier neutral), high-quality colocation in data centers around the world. It is one of the most significant players in retail colocation for enterprises. It also has a substantial financial vertical play in its proximity hosting for low-latency trading.
  • Managed Hosting: Savvis is among the market share leaders in managed hosting. It is a highly capable provider, ranked for years as a Leader (and at or near the top of the pack) in Gartner’s Magic Quadrant for the market.
  • Networking: Although Savvis has a history as an ISP, their significant acquisition of networking assets came with the acquisition of Cable and Wireless North America’s assets (which included a substantial amount of MCI assets that had to be divested in the MCI-WorldCom acquisition), which they did in order to get Exodus. The networking business has been in slow decline for years, although it has some usefulness in competing with BT Radiance, in the proximity hosting context.

As part of their managed hosting business, Savvis has built a significant portfolio of cloud IaaS products. Savvis has historically had a tendency to overcomplicate their product lines, and cloud has been no exception to this rule. The most significant elements in the portfolio are Virtual Intelligent Hosting (utility managed hosting, equivalent to Terremark Infinistructure, AT&T Synaptic Hosting, etc.), and Symphony VPDC (self-service public cloud, equivalent to Terremark Enterprise Cloud, AT&T Synaptic CaaS, Verizon CaaS, NaviSite NaviCloud, etc.), which is divided into tiers of service quality. Savvis also has an array of private cloud services.

We consider Savvis to be highly competitive in enterprise-class cloud IaaS. They do not necessarily have the best service, featurewise, and they are a relatively expensive option, but they have done a credible job of incorporating security into their architecture, emphasized in RFP responses, in a way that customers respond to very strongly. Savvis has also done a good job layering managed services on top of their cloud offerings, and has begun to compete quite aggressively in the cloud-enabled data center outsourcing market segment, targeting mid-market companies.

In short, CenturyLink is buying a very high-quality set of assets. Qwest has a colocation business, but it is marred by poor customer service (it’s pretty hard to deliver poor customer service in a business as simple as colocation, but Qwest has historically managed to do this, although quality varies per-data-center). Qwest also has a managed hosting business, but it’s historically been sub-par to the market and well behind the hosting businesses of AT&T and Verizon. Qwest’s forays into cloud computing are embryonic. Consequently, CenturyLink is vastly accelerating its entry into this business with the Savvis acquisition. Also, given the capabilities gap between CenturyLink and Savvis, customers can probably expect little if any disruption from the acquisition.

It’s clear that carriers, even the less visionary ones, now feel that they need to have solutions to address data center needs, not just networking needs. While some carriers were able to articulate a vision around this relatively early on — AT&T notably — all the other network operators are quickly falling in line, albeit with varying degrees of vision and commitment.

CenturyLink buys Savvis

Ever since Verizon bought Terremark, and Time Warner Cable bought NaviSite earlier this year, people have speculated about the fate of Savvis. Well, today we know: CenturyLink is buying Savvis.

CenturyLink is a carrier, which rolled up a lot of rural telco assets before going on to digest Qwest. Acquiring Savvis signals its cloud computing ambitions — few carriers can afford to be without a cloud strategy, and apparently CenturyLink has decided to buy one rather than to build one. CenturyLink didn’t have much in the way of hosting assets pre-Qwest, and Qwest’s hosting assets were weak; with the exception of pure-plays like Amazon, nearly everyone in the cloud IaaS business has a hosting background. Moreover, while Qwest has been trying to get into the cloud, they are not a player to speak of.

With the Savvis buy, if CenturyLink is smart, Savvis gets largely left alone to continue what’s been a pretty successful colocation, hosting, and cloud IaaS business, Savvis incorporates the Qwest data center assets and kicks their hosting business to the curb (migrating the customers onto Savvis managed hosting), and Savvis stops fooling with a networking business save for what’s necessary to deliver proximity hosting. CenturyLink has announced that they’ll be consolidating their hosting assets with Savvis and having their current CEO run the unit, so that’s a good sign, at least.

I do believe that early industry consolidation may be bad for cloud innovation, but there’s a certain inevitability to the big network operators picking up leading cloud IaaS providers.

The really interesting question now is if Rackspace is a target. Their model doesn’t fit anywhere near as well into a carrier, given their focus on customer service — arguably their culture would be annihiiated in just about any merger with a likely buyer. Moreover, they have focused upon commodity cloud, while carriers are typically far more interested in enterprise cloud. But that doesn’t mean they’re not a takeover target anyway.

Cloud IaaS market segmentation

Over the past couple of months, I’ve been mulling over a way to structure and segment the cloud infrastructure as a service market. Some of those ideas have appeared on my blog, and have since been refined, heavily peer reviewed, and then trial-ballooned at clients. The result is a new research note, called The Structure of the Cloud Compute IaaS Market. (Sorry, Gartner clients only.)

In brief, I’ve used a two-axis strategy to break the market into eight segments.

The first axis is your general use case. Are you sourcing infrastructure that is focused on a single application (or a group of tightly-related applications, like your e-commerce application)? Or are you sourcing infrastructure for a range of diverse applications, essentially replacing a part or all of your data center? For the former, you are essentially doing a form of hosting. For the latter, you have a whole host of significantly more complex requirements.

The second axis is the level of management services. The first possibility is unmanaged — you’re doing pretty minimal operations, probably because this is a test/dev environment. The second possibility is self-managed — the provider offers the IaaS platform (data center, hardware, and virtualization), but you do the OS layer on up yourself. The third possibility is that the core foundation is service-provider managed — they also handle the OS management, usually with a security emphasis (patch management et.al.). The fourth possibility is that some or all of the rest of the application stack, minus the app itself, is service-provider managed (which usually means DBA support, maintenance of a Java EE or .Net stack of middleware, etc.).

That gets you eight market segments, as follows:

SCENARIOSingle ApplicationMultiple Applications
UnmanagedDeveloper-centric cloud hostingVirtual lab enviroment
Self-ManagedScale-out cloud hostingSelf-managed virtual data center
Core Foundation ManagedSimple managed cloud hostingTurnkey virtual data center
Application Stack ManagedComplex managed cloud hostingCloud-enabled data center outsourcing

Each of these segments has very different buyer profiles and requirements. No single service provider serves all of these segments. At best, a service provider might serve a few of these segments well, at the current state of the market. These are all cloud IaaS, but each segment serves a different kind of customer need.

Want more details? Read the research note.

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