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The hundred billion dollar cloud gamble

4 min read

This is the second post about some insights I gathered from attending the Cloud World Forum in London in June. The first post covered some uncomfortable choices for cloud customers. This post explores the equally unpleasant choices for suppliers.

Supplier strategy roulette

Although, on some measures, cloud computing is still only a small part of the IT market it is growing exceptionally quickly and has an enormously disruptive impact. All of the traditional IT providers are responding to the challenge and there are a dizzying number of new entrants. In many ways this feels like a game of roulette. The wheel is spinning, it is too early to know where the ball will land but the players must all place their bets now - or leave the table. What options are appearing?

Amazon, Microsoft and Google have taken the hundred billion dollar option and built one-size-fits-all, global cloud services. The market may be able to accommodate more players at this particular table but please note the minimum stake. If you can only wager single billions (see the recent news from HP and Cisco) it is probably already too late to join in. Even those prepared to risk such enormous sums will still need to fight hard (as this great post by @swardley illustrates).

For others there is plenty of revenue to be made supplying equipment and components to this small “hypercloud” set but this will be a low margin commodity business and will require highly specialised managerial and technical skills. Some organisations will thrive by creating and licensing intellectual property, such as key cloud standards, but perhaps only one or two organisation will be smart enough to keep innovating faster than the open source community for any significant period of time.

Hedging your bets

Some IT providers have made other bets including:

  • regional or industry specific clouds
  • managed and private clouds
  • cloud service integration.

These are certainly viable businesses in the short-term but these organisations need to be thinking about contingency plans. All it takes is for a couple of the cloud giants to add a parameter setting or two to their self-service consoles and a lucrative niche market could vanish almost over night.

These suppliers might be better off joining most of the rest of the IT industry who are giving up the fight and are building businesses which use and depend upon the services of 3 - 5 global cloud giants. This includes things like development tools, re-usable components and industry specific applications.

It is worth remembering that the big cloud providers can’t do everything and cloud service customers will continue to need temporary hands and brains for big projects, cloud-aware auditors and lawyers and local network infrastructure but if this is not already your business it will be hard to break in on the back of the wave of cloud sweeping the IT industry. In theory, volume discounting by the big providers creates space for resellers to emerge but this is likely to be a business for existing financial service organisations rather than struggling IT firms and might only be a safe bet if governments start to place open market regulations on cloud services as they do for other utilities, such as telecommunications.

If all else fails? Cheat!

Finally, if I have spoiled all of your other options, there might just be one more. Some IT suppliers could survive as protected national cloud champions. One of the BRICS nations or a big European country could attempt something like this but if you are not already receiving special treatment you are probably not going to be picked as the national champion - sorry!

Who do you think will win in the great cloud computing shake out? Add a comment below or use the Twitter button to let me know what you think.

Originally published on by Richard Barton