In the cloud, bigger is better. Hyperscale providers are gathering market share because their enormous size allows them to provide lower service costs, which generates increased revenue so they can grow even bigger.
But while this benefits the enterprise in both costs and scale, are there any advantages to utilizing a smaller provider, and if not, will the inevitable market consolidation to only a few mega-providers prove to be a boon or a bane to the world economy?
Already, the top four cloud providers – Amazon, Microsoft, Google and IBM – control more than 60 percent of the market, according to Synergy Research Group. And Amazon alone accounts for 40 percent, nearly twice as much as the other three combined. Meanwhile, the data shows that the legions of mid-tier providers are losing market share in aggregate by about 1 percent per year, although a few standouts like Alibaba and Oracle are showing gains, while the smallest of players are losing about 4 percent per year.
Smaller providers, in fact, face a stark choice between obsolescence or assimilation into the large-provider ecosystem. One way to accomplish the latter, says 451 Research, is to become a cloud broker helping enterprises manage their distributed data environments. In the firm’s latest report “Managed Infrastructure Market Overview 2016,” analyst Carl Brooks notes that all of the top providers are offering outreach to third-party services, which companies like Rackspace are leveraging to provide management and orchestration between providers like Amazon and Microsoft, as well as internal private cloud architectures built on VMware. In this way, smaller providers can avoid the race to the bottom in terms of cost, which they can’t win anyway, and concentrate on higher-margin specialized services.
CenturyLink is also pushing this strategy with its Cloud Application Manager orchestration stack, which seeks to help the enterprise implement a multi-cloud strategy. The system offers a cloud-agnostic approach to distribute workloads, manage services and allocate resources across public, private and hybrid infrastructure without sacrificing control or visibility. In this way, organizations can avoid locking themselves into a single provider while automating application deployment and resource consumption, and running the analytics needed to optimize costs over time. The software can be consumed under a SaaS model or deployed on an in-house appliance.
For smaller providers to stake a claim in the larger cloud ecosystem, wide area connectivity will have to be both fast and secure. In the UK, a company called Telehouse is utilizing Microsoft Azure’s ExpressRoute platform to provide a multi-cloud connectivity exchange between disparate providers. Run from its Docklands campus in London, the service provides a portal through which organizations can build and manage their inter-cloud connections in real time using a fully redundant dual-homed connection on Telehouse’s core Ethernet infrastructure. At the same time, connectivity between the enterprise and cloud service providers is maintained over a secure private VLAN. The service is set to launch in the London area next month and expand to additional regions over the coming year.
It’s been said that, willingly or not, the enterprise will not employ the cloud, but many clouds. This may be true on a functional level, but from an operations perspective, it’s important to maintain continuity across cloud infrastructure so that the overall data environment appears to be a single, integrated whole.
It seems at the moment that the large providers will bring scale to this equation but that smaller firms can provide a depth of knowledge and a level of customization that the enterprise desperately needs as it transitions to a cloud-facing, digital business model.
The challenge for small providers is not to become bigger, but to get better at what they already do.
Arthur Cole writes about infrastructure for IT Business Edge. Cole has been covering the high-tech media and computing industries for more than 20 years, having served as editor of TV Technology, Video Technology News, Internet News and Multimedia Weekly. His contributions have appeared in Communications Today and Enterprise Networking Planet and as web content for numerous high-tech clients like TwinStrata and Carpathia. Follow Art on Twitter @acole602.