According to a recent article by Derrick Harris, “Rackspace grew its public cloud revenues 36 percent year over year, to $99 million. That’s steady growth, although hardly the meteoric growth its chief rival Amazon Web Services seems to be experiencing.”
Indeed, Rackspace grew its public cloud revenue 36 percent year over year, according to it second-quarter earnings released last week. If you’re keeping track, “that comes in just north of $99 million, up from about $72.5 million last year and just under $91 million for this year’s first quarter.”
However, the problems arise when you do well, but your close competition does much better. In that scenario, your success does not seem very successful. “Rackspace isn’t growing nearly as fast as chief rival Amazon Web Services. Amazon released its second-quarter earning[s] a couple weeks ago and reported a 64 percent year-over-year increase in cloud revenues. (Well, technically, in “other” revenues, which many industry watchers believe is comprised largely of AWS.) It’s second-quarter take: $844 million.”
So, if you follow the public cloud market, AWS seems to be stomping Rackspace, HP, IBM, Microsoft, and Google into the dirt when you consider relative and overall growth. This should come as no surprise, after seeing all of the new cloud computing projects out there that are based upon AWS, perhaps 9 out of 10.
Many projects are earmarked for AWS, even before the core technical and business requirements are understood. While I don’t agree with that approach, you have to hand it to AWS for dominating so much of the market that other solutions don’t even appear on the radar screens of many enterprise IT shops that are moving to public cloud.
Just the number of articles that cite the huge growth of AWS over the last 3 years could take you weeks to read. The momentum of AWS seems unstoppable, and that is either having a chilling or a stimulating affect on the emerging public cloud computing marketplace. So, which is it?
The concept of AWS displacing growth. The argument that I hear from AWS’s close competitors is that there is only a limited number of public cloud computing opportunities out there, and AWS is hogging most of them.
The notion is that the market for public cloud services is only a limited number of dollars that are up for grabs, and AWS is pushing them out of the way, taking more than their fair share. Thus, they are not allowed to grow at an equal rate in the market.
In order for this argument to be sound, there is an assumption that the public cloud computing market is just a finite amount of money. So, let’s say there are $4 billion of public cloud opportunities in 2014, or, money that will certainly be spent on public cloud services. Thus, AWS takes 2 billion, and that only leaves 2 billion to be divided up with the other large and small public cloud providers. Therefore, AWS is removing revenue directly from their competitors, or displacing growth, if you believe this theory.
The concept of AWS innovating growth. The other side of the argument is that AWS is actually creating the market they are claiming, and that without AWS in the public cloud computing marketplace, the market would not be as large as it is.
The notion is that enterprises are leveraging public cloud computing because of the success of AWS. Thus, they feel that they are not the first to drive this technology, AWS seems to be an easy choice, considering that most think AWS is a de-facto public cloud standard, therefore they feel the movement into public cloud by leveraging AWS is less risky.
If you ask most of those who leverage AWS, they will tell you they leverage this technology due to its dominance in the marketplace, which, in essence, has proven the success of public cloud computing and AWS. Thus, it’s easy to make the case to their stakeholders that public cloud is a sound alternative to building data centers, which is proven by the rapid growth of a single player in the space. So, AWS is innovating growth, if you believe this theory.
So, who’s right? While it has to be rough for competing public cloud providers to see a single player gather up so much momentum in an emerging marketplace, the fact is that the market would not be as large as it is without AWS.
AWS is innovating growth in the market, and I believe the market would not be as large as it is right now, were it not for AWS. Furthermore, the growth of the public cloud computing space is still early stage, and anything can happen as this technology progresses over the next several years.
This does not mean that dominance by a single player comes without downsides. We are always concerned about too much influence, and thus the ability to jack up prices with very few alternatives with the same features and functions. Moreover, there is a tendency to jump too quickly to AWS due only to its market dominance when other solutions are a better and more cost-effective fit.
However, the fact of the matter is that the emerging public cloud would be on few radar screens were it not for the success of AWS. Their presence in the market has been one of innovating growth…for now.