There seems to be an endless parade of hosting companies eager to explain to me that they have an “enterprise class” cloud offering. (Cloud systems infrastructure services, to be precise; I continue to be careless in my shorthand on this blog, although all of us here at Gartner are trying to get into the habit of using cloud as an adjective attached to more specific terminology.)

If you’re a hosting vendor, get this into your head now: Just because your cloud compute service is differentiated from Amazon’s doesn’t mean that you’re differentiated from any other hoster’s cloud offering.

Yes, these offerings are indeed targeted at the enterprise. Yes, there are in fact plenty of non-startups who are ready and willing and eager to adopt cloud infrastructure. Yes, there are features that they want (or need) that they can’t get on some of the existing cloud offerings, especially those of the early entrants. But that does not make them unique.

These offerings tend to share the following common traits:

1. “Premium” equipment. Name-brand everything. HP blades, Cisco gear except for F5’s ADCs, etc. No white boxes.

2. VMware-based. This reflects the fact that VMware is overwhelmingly the most popular virtualization technology used in enterprises.

3. Private VLANs. Enterprises perceive private VLANs as more secure.

4. Private connectivity. That usually means Internet VPN support, but also the ability to drop your own private WAN connection into the facility. Enterprises who are integrating cloud-based solutions with their legacy infrastructure often want to be able to get MPLS VPN connections back to their own data center.

5. Colocated or provider-owned dedicated gear. Not all workloads virtualize well, and some things are available only as hardware. If you have Oracle RAC clusters, you are almost certainly going to do it on dedicated servers. People have Google search appliances, hardware ADCs custom-configured for complex tasks, black-box encryption devices, etc. Dedicated equipment is not going away for a very, very long time. (Clients only: See statistics and advice on what not to virtualize.)

6. Managed service options. People still want support, managed services, and professional services; the cloud simplifies and automates some operations tasks, but we have a very long way to go before it fulfills its potential to reduce IT operations labor costs. And this, of course, is where most hosters will make their money.

These are traits that it doesn’t take a genius to think of. Most are known requirements established through a decade and a half of hosting industry experience. If you want to differentiate, you need to get beyond them.

On-demand cloud offerings are a critical evolution stage for hosters. I continue to be very, very interested in hearing from hosters who are introducing this new set of capabilities. For the moment, there’s also some differentiation in which part of the cloud conundrum a hoster has decided to attack first, creating provider differences for both the immediate offerings and the near-term roadmap offerings. But hosters are making a big mistake by thinking their cloud competition is Amazon. Amazon certainly is a competitor now, but a hoster’s biggest worry should still be other hosters, given the worrisome similarities in the emerging services.

Two public cloud announcements from hosting providers this week, with some interesting similarities…

Verizon

Verizon has launched its Computing as a Service (CaaS) offering. This is a virtual data center (VDC) offering, which means that it’s got a Web-based GUI within which you provision and manage your infrastructure. You contract for CaaS itself on a one-year basis, paying for that base access on a monthly basis. Within CaaS, you can provision “farms”, which are individual virtual data centers. Within a farm, you can provision servers (along with the usual storage, load-balancing, firewall, etc.). Farms and servers are on-demand, with a daily price.

Two things make the Verizon offering distinctive (at least temporarily). First, farms can contain both physical servers and virtual (VMware-based) servers, on an HP C-class blade platform; while hybridized offerings have become increasingly common, Verizon is one of the few to allow them to be managed out of a unified GUI. Second, Verizon offers managed services across the whole platform. By default, you get basic management (including patch management) for the OS and Verizon-provided app infrastructure. You can also upgrade to full managed service. It looks like, compared to similar providers, the Verizon offering is going to be extremely cost-competitive.

Carpathia Hosting

In yet another example of a smaller hoster “growing up” with serious cloud computing ambitions, Carpathia has released an offering it calls Cloud Orchestration. It’s a hybrid utility hosting model, combining its managed dedicated hosting service (AlwaysOn) with scaling on its virtual server offering, InstantOn.

Carpathia has stated it’s the first hybrid offering; I don’t agree that it is. However, I do think that Carpathia has rolled out a notable number of features on its cloud platform (Citrix Xen-based). It’s made a foray into the cloud storage space, based on ParaScale. It also has auto-scaling, including auto-provisioning based on performance and availability SLA violations (the only vendor I know of that currently offers that feature). OS patch management is included, as are other basic managed hosting services. Check out Carpathia CTO Jon Greaves’s blog post on the value proposition, for an indication of where their thinking is at.

Side thought: Carpathia is one of the few Xen-based cloud providers to use Citrix Xen, rather than open-source Xen. However, now that Citrix is offering XenServer for free, it seems likely that service providers will gradually drift that way. Live migration (XenMotion) will probably be the main thing that drives that switch.

If you need more RAM, and you have to call your service provider, they’ve got to order the RAM, wait until they receive it, and then put it in a physical server, before you actually get more memory, and then they bill you on a one-off basis for buying and installing the RAM, you’re not doing cloud computing. If you have to negotiate the price of that RAM each time they buy some, you are really really not doing cloud computing.

I talked to a client yesterday who is in exactly this situation, with a small vendor who calls themselves a cloud computing provider. (I am not going to name names on my blog, in this case.)

Cloud infrastructure services should not be full of one-offs. (The example I cited is merely the worst of the service provider’s offenses against cloud concepts.) It’s reasonably to hybridize cloud solutions with non-cloud solutions, but for basic things — compute cores, RAM, storage, bandwidth — if it’s not on-demand, seamless, and nigh-instant, it’s not cloud, at least not in any reasonable definition of public cloud computing. (“Private cloud”, in the sense of in-house, virtualized data centers, adopts some but not all traits of the public cloud to varying degrees, and therefore gets cut more slack.)

Cloud infrastructure should be a fabric, not individual VMs that are tied to specific physical servers.

My colleague Daryl Plummer has mused upon the future of cloud in a blog post titled “Cloud Infrastructure: The Next Fat Dumb and Happy Pipe?” In it, he posits that cloud infrastructure will commoditize, that in 5-7 years the market will only support a handful of huge players, and that value-adds are necessary in order to stay in the game.

I both agree and disagree with him. I believe that cloud infrastructure will not be purely a commodity market, specifically because everyone in this market will offer value-added differentiation, and that even a decade out, we’ll still have lots of vendors, many of them small, in this game. Here’s a quick take on a couple of reasons why:

There are diminishing returns on the cost-efficiency of scale. There is a limit to how cheap a compute cycle can get. The bigger you are, the less you’ll pay for hardware, but in the end, even semiconductor companies have to make a little margin. And the bigger you are, the more you can leverage your engineers, especially your software tools guys — but it’s also possible that a tools vendor will deliver similar cost efficiencies to the smaller players (think about the role of Virtuozzo and cPanel in shared hosting). Broadly, smaller players pay more for things and may not leverage their resources as thoroughly, but they also have less overhead. It’s important to reach sufficient scale, but it’s not necessarily beneficial to be as large as possible.

This is a service. People matter. It’s hard to really commoditize a service, because people are a big wildcard. Buyers will care about customer service. Computing infrastructure is too mission-critical not to. The nuances of account management and customer support will differentiate companies, and smaller, more agile, more service-focused companies will compete successfully with giants.

The infrastructure itself is not the whole of the service. While there will be people out there who just buy server instances with a credit card, they are generally, either implicitly or explicitly, buying a constellation of stuff around that. At the most basic level, that’s customer support, and the management portal and tools, service level agreements, and actual operational quality — all things which can be meaningfully differentiated. And you can obviously go well beyond that point. (Daryl mentions OpSource competing with Amazon/IBM/Microsoft for the same cloud infrastructure dollar — but it doesn’t, really, because those monoliths are not going to learn the specifics of your SaaS app, right down to providing end-user help-desk support, like OpSource does. Cloud infrastructure is a means to an end, not an end unto itself.)

It takes time for technology to mature. Five years from now, we’ll still have stark differences in the way that cloud infrastructure services are implemented, and those differences will manifest themselves in customer-visible ways. And the application platforms will take even longer to mature (and by their nature, promote differentiation and vendor lock-in).

By the way, my latest research note, “Save Money Now With Hosted and ‘Cloud’ Infrastructure” (Gartner clients only) is a tutorial for IT managers, focused on how to choose the right type of cloud service for the application that you want to deploy. All clouds are not created equal, especially now.