Is The Cloud Space Getting Too Crowded?

by Sohini Bagchi    Mar 27, 2014

cloud war

Ever wonder what’s happening in the cloud computing space? With every large vendor, such as Microsoft, Google, Amazon, Cisco and IBM, and the innumerable smaller ones, wooing customers with their best ever offerings in the Cloud, one thing is obvious - the Cloud computing space is increasingly getting crowded!

With more vendors joining the fray, needless to say today’s CXOs are spoilt with choice of their service providers, as Gartner predicts 70% of CIOs expecting to change their tech vendors over the next three years, courtesy Cloud. However, experts point out it is equally important that they make the right move when it comes to selecting their preferred cloud vendors.

Price: A key differentiator

The cloud providers – especially the big ones - have already realized the biggest differentiating factor - Price and are constantly engaged in a race-to-the-bottom pricing war. The lower the prices, happier are the customers. For example, Google has announced major price reductions for its computational and storage cloud computing services, presenting a new challenge to rivals Amazon Web Services - the market leader - and Microsoft Azure. Google is reducing computational services by as much as 32%, and storage prices up to 68%. This matches or in fact beats price cuts previously announced by Amazon and Microsoft.

Amazon.com would not like to be left behind. It immediately announced a drop in prices on most of its cloud computing services starting April 1. The price cuts range from 10-65%, Andrew Jassy, senior vice president of Amazon Web Services, told at a recent conference.

Microsoft has already made its stands clear at the recent Windows Azure Conference in Bangalore, this month. “We are at a pivotal time in our industry and users are relying on cloud and mobile computing technologies,” said Microsoft CEO Satya Nadella, addressing more than 500 delegates through a video message at the conference.

Karan Bajwa, Managing Director, Microsoft India states, “We are in a mobile-first, cloud-first world and cloud is becoming an integral part of the IT infrastructure in Indian enterprises today.” With Azure aggressively targeting both large enterprises and SMBs, it is obvious that the company is will further work on its pricing strategies to lure more and more customers.

While we focus on the Big Three in Cloud, there’s more to this cloud competition. Cisco Systems, this week, announced its entry into the cloud services market, as it plans to invest $1bn over the next two years to develop hosting capabilities for infrastructure and platform services for enterprises. Rob Lloyd, Cisco president of development and sales tells WSJ in an interview: “Everybody is realizing the cloud can be a vehicle for achieving better economics [and] lower cost.” Lloyd however mentioned thatand that “Cisco’s approach will differ from its rivals.”

The other interesting observation comes with IBM’s $1.2bn expansion of its SoftLayer cloud services, believe experts. According to analysts, with the sale of its Systems x server group to Lenovo, IBM is betting it will make up the lost revenue and gain new business by getting businesses to buy virtual infrastructure rather than on-premises devices.

Performance: The main trigger?

Cloud evangelist Ajay Sawant states that when the cost per unit goes down, consumption goes up in any business and that’s what is happening with the cloud vendors as well. However, there is a sharp paradox. There’s more to Cloud than just price; this is about capturing customers and market share in the already crowded and increasingly competitive hosting and infrastructure services market. These vendors are betting that volume will make up for lower prices in the long run, which fuels the pricing wars.

“CIOs are realizing that the future is in the cloud and price isn’t the only thing they are relying on,” he says. Customers are also looking around for better performance, scalability and reliability, and will pick the cloud vendor whom they can trust. The competition revolves around all these attributes, he believes.

Read: CIOs grapple as cloud becomes mainstream

While the cloud biggies - Amazon, Google and Microsoft – will continue to grab the limelight, analysts believe there are over 1,500-2,000 sizable cloud infrastructure providers around the world and scores of additional smaller service providers that are also part of this “Cloud Jam”. All are competing for a piece of the $100-billion in 2014 cloud services market opportunity, as Gartner calls it.

With so many vendors joining the cloud war, it could be interesting to see how they create a differentiation in terms of price and performance and shape customer value expectations.

Read: Infrastructure as a service price cuts accelerate