Every technology market goes through different growth phases and at this point I think we are witnessing the beginning of the second phase for the cloud market, in which the number of players increase, mainly by new market entrants. And at the same time competition increases as the combined forecast of the market players exceeds the overall market growth – so there is significant price competition in the market.
Nothing to worry about in general, this is a normal phase for every technology market as the market potential attracts more players than the market can bear long term, but it’s all for the better as this process challenges the existing leaders, creates new players and sets up the market for stage three – continuous and supported growth.
Exhibit 1 – IBM wins GSA complaint
The CIA was looking to put some processes in the cloud already last year, got complaints at the time for Microsoft and AT&T, but ended up selecting Amazon’s AWS in January.
Ironically the findings report triggered by the complaint found a cost advantage for the 2nd best bid – IBM – but the CIA felt it wanted to go with proven technology.
Not surprisingly, IBM complained to the GAO – and recently the complaint was upheld… so the CIA needs to re-tender… and we will stay tuned to what happens.
What it shows though is that the cloud market is maturing, as this is the first time we see a GAO complaint around the cloud market. Something that happens routinely in other government procurement situations…. Anyone remember the Boeing / Airbus tanker selectionscharmuetzel?
And simply put – IBM could not let this one slide, too big of an opportunity, with all the benefits of being one of the first cloud providers to the federal government, follow up business etc. – which is a sign that the overall potential of the cloud market is not enough at this point to e.g. make IBM walk away to other large cloud opportunities.
Exhibit 2 – HP and Red Hat bundle away
Another sign of entering the 2nd phase of a technology market is, that players partner and / or create bundlings to differentiate their services from the other market players. So it happened last week when HP announcedtheir CloudOS at their HPConverge conference and Red Hat announcedthe Red Hat Cloud Infrastructure at Red Hat Summit.
In both cases congrats need to go to the respective marketing teams under Marty Homlish and Jacky Yeaney for associating generic terms like OS and infrastructure with their offerings. A dream for any marketer. As the association of the generic term with your brand is the Holy Grail for associative thinking, like e.g. we picked HP because of their Cloud Operating system – and guess what, no one else has a CloudOS. Same story for infrastructure.
And it does not matter that behind the scenes – there is nothing really new that HP and Red Hat have created – they just bundled existing offerings together. But there is a value for customers from bundling, as the expectation is that the bundling vendor will enable an out of the box integration of these services. And the bundling vendors of course want to bundle with higher ground offers, that make their product unique and easier to differentiate and sell. So Red Hat of course uses Red Hat Enterprise Linux and HP will enable their moonshot servers soon, as the hardware platform for HP Cloud OS.
Exhibit 3 – Partnerships game heats up
In the last keynote of the HP Converge conference – normally these closing keynotes are boring, wrap up the message affairs – HP’s COO Bill Veghte unleashed a zinger for the cloud market, mentioning that Workday was moving to the HP Converged Cloud. A huge move – even in cloud terms, but Veghte peppered it even more disclosing, that Workday would be leaving their existing partner – and HP competitor – AWS.
Only one journalist (@StevenJBurke kudos!) pickedup on this – I guess the rest was gone – and the replay of the keynote has not been made available by HP - yet. So the news only slowly cooked up – and prompted a re-commitment of Workday to AWS.
The sign of maturation in the cloud market to look for here is, that there are less prized possessions to claim for the infrastructure players in order to make their otherwise boring offerings more attractive. Expect more tug of war between the infrastructure vendors trying to get more of the prized and recognized SaaS vendors to adopt their cloud offerings.
Advice for cloud consumers
This is a great phase for the market to be in and for you to make you first steps to the cloud or to double your investments if you already started. The vendors will vie for your business and offer it to you at most attractive terms, since they try to fulfill their sales quotas that are ambitious. The risk is that you may pick a partner who will no longer be in the game in the next phase or market maturation.
Advice for cloud market players - infrastructure
You need to have a sound partnership strategy in place up the cloud stack, a pure acquisition strategy will not be enough in the longer term, unless you are really, really deep pocketed.
Advice for cloud market players - platform
Time to cast your strategy – will you be a open vendor that will try to partner with a lot for the infrastructure vendors, or do you pick a single, or better only a few of the infrastructure players? Equally you need to look up the stack to make sure you are not being shut out of more higher level positioned opportunities in the cloud stack.
Advice for cloud market players – SaaS
If you have your own infrastructure – keep evaluating it from a cost perspective. After cloud consumers you are the most attractive group of prospects in the cloud market. If you partner – re-assess your partners in terms of cost effectiveness and next market phase survivability.
Advice for cloud market players – Services
Your services are the glue keeping the market together. Try to move up to the cloud stack where the more lucrative opportunities are – and those engagements that determine the utilization direction down the stack.
MyPOV
Great phase for the cloud market – it is graduating from an early interest phase to a player competition for customers. Challenges exist for consumers of cloud offerings to bet on the winning horses, and for cloud vendors to become and stay a horse that is in contention. Exciting times.