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A Cloud Oligopoly or a Vibrant Open Ecosystem?

Alex Freedland - August 24, 2015

Even as innovation drives today's thriving cloud ecosystem, there are early warning signs of a “cloud” oligopoly. Though all of the public cloud providers combined run less than 10 percent of all enterprise workloads, the value of the cloud has largely been demonstrated by AWS and its competitors, and many pundits are beginning to question the viability of in-house alternatives. CIOs find themselves under increasing pressure to provide an alternative to the value proposition offered by the public cloud.

CIOs have two choices: build the cloud infrastructure in-house (using their own resources or those of a managed cloud partner) or send their workloads to the public cloud.

Everyone who has ever touched AWS knows how easy and user friendly it is, and Amazon and its competitors continue to destroy costs by innovating at every layer of the stack, taking advantage of the economies of scale and homogeneity of their infrastructure. This feels like a breath of fresh air when compared to the behavior of legacy vendors such as IBM and HP or traditional software providers such as VMware, Microsoft and Red Hat. These vendors have a disincentive to reduce costs, and they need every penny of their astronomically high margins to justify their lofty market capitalization.  

The trillion dollar question is: Where will the enterprise workloads run and who will own the cloud? A betting man would be sorely tempted to put his chips on the public cloud providers to win.

Unfortunately, while attractive on the surface, such a victory would come at a cost. If the public cloud providers win that bet, the cloud could easily be dominated by an oligopoly of three to five vendors operating a massive array of homogeneous computer farms. Such a world will have no place for traditional hardware vendors such as HP, IBM and EMC, or the software vendors such as VMware and Red Hat. Gone will be not just these traditional vendors, but also the vibrant and diverse community of innovators designing new storage, network and application infrastructure.

For those of us who do not want a dystopian oligopoly, what is a viable alternative?

An open source cloud platform is the only answer. A large open source community can pull together the cumulative resources sufficient to compete with the incumbents. The most successful ones use the right blend of leadership and anarchy. They attract the free thinkers that we need to drive innovation, yet have enough discipline and focus to deliver an open computing platform that can be easily consumed and operated. This allows for the whole world to integrate their innovations without worrying that a guard at the door will turn them away.

As utopian as it sounds, this is the reality of OpenStack. Forrester recently wrote that OpenStack is positioned to become the fifth major public cloud camp, against AWS, Azure, Google and VMware. With more than 170 companies and 2,300+ engineers contributing to the Kilo release, OpenStack is the only viable open platform that has the industry mindshare and the requisite capital investment to compete with the incumbent public cloud providers.

But where does it stand in the way of leadership? For any organic movement to succeed, the motivation of the leadership is also especially critical. The right leader is the one who understands the purpose of the movement and has no other agenda other than helping the movement realize its full potential.

In the last few weeks, the OpenStack ecosystem witnessed two important announcements, both featuring Intel as the protagonist: a collaboration with Rackspace to form an OpenStack Innovation Center and a co-development collaboration with Mirantis that injects another $100 million into OpenStack engineering to achieve enterprise readiness at scale.

It is good to see that Intel (which was recently voted a Platinum member of the OpenStack Foundation) is starting to commit substantial resources to the OpenStack ecosystem. By making OpenStack an integral part of the “Cloud for All” initiative, Intel (which owns 90+ percent of the server market worldwide) sends a strong message to enterprise buyers that OpenStack and Intel-based commodity hardware will constitute a natural union.

The choice of these two development partners is also quite telling. Rackspace is the original founder of OpenStack, and together with NASA, seeded the technology, started a community movement and kept it truly open by spinning it out to its own Foundation. Today Rackspace is using OpenStack as a platform for its public cloud and offers its customers a number of managed cloud offerings, some of which are based on OpenStack. It also remains a top-5 contributor to the OpenStack code base.  

Mirantis (which is currently a top-3 contributor to OpenStack) is the only major pure-play OpenStack vendor that is focused on delivering enterprise-grade OpenStack to its customers. Mirantis does not use OpenStack as a channel to sell other proprietary products, and its only motivation is to have upstream OpenStack work well out of the box.

Intel, Rackspace and Mirantis pulling together substantial human and financial resources to make upstream Openstack a first-class cloud computing platform is a major step towards retaining the heterogeneity of computing innovation. Other companies who believe in choice and free innovation should step up as well.

Together, we can make cloud’s future the vibrant, innovative space we all know it can be.

(Photo by Jerry Wooster.)

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