Cloud Computing: Winners and Losers of 2009

Krishnan Sub ramanian, Researcher and Analyst, www.krishworld .com

As we are winding down the year 2009, it is time to look back and take stock on some of the
winners and losers this year in the field of cloud infrastructure and platform market. Before I
proceed further in this brief report, I would like to make the following disclaimer. This analysis
is not based on any new releases or new features offered this year and may as well be about
the repositioning or evolution of the vendors in the marketplace. The conclusions made in this
research brief are not based on any scientific methodology and it may include my personal bias.
These conclusions are more about how I feel about certain vendors and their offerings than
about their market positions.

Winners in 2009

Amazon Web Services: The biggest winner is Amazon Web Services. Well, they may not
have cracked the enterprise markets just yet. They may not have adopted open standards or
even be part of any serious standards process right now. But, they have consistently innovated
in this space taking baby steps towards the market domination. No, I am not saying they are
the clear market leader. I still feel the market is in the early stages and the winner will not be
decided anytime soon. But they have positioned themselves in such a way that they currently
lead the pack in the marketplace, by forcing everyone else, including the giants like IBM,
Microsoft, etc., to do the catching up. When everyone was whining about their prices, they
moved in with the reserved instance pricing to make them competitive with the traditional
hosting providers. When it appeared that Microsoft might indulge in a pricing war with them,
they not only cut their prices to make them more attractive, they also opened up an entirely
new marketplace called Spot Instances (right now monopolized by Amazon itself) which could
potentially reshape the cloud economics in the future. In spite of the fact that Amazon is an old
horse from the dot com generation, they are moving fast like a startup. This agility is keeping
them well ahead of other players in this category and, even, forcing some vendors towards a
possible "loser" tag.

In spite of all the momentum on the side of Amazon, they still couldn't crack the enterprise
marketplace. Their attempt to attract enterprises with Virtual Private Cloud offering didn't
manage to break the traditional enterprise inertia and the uneasiness towards the security of
cloud computing. Even though some pundits expect 2010 to be the year when Amazon will crack
the enterprise space, I am not optimistic about it. It will be 2011 or 2012 before they could get
some traction on the enterprise side. Let us not forget that for enterprises, economics is just
one of the many factors.

Losers in 2009

I will talk about some of the vendors whom I consider as losers, either they have lost the game
or facing big troubles right now. Once again, I want to emphasize that these are my perceptions
about their market positions and not analysis based on any scientific methods. Having made
my disclaimer clear, I want to talk about the three companies that hasn't lived up to the initial
expectations.

Sun Microsystems: Of all the "giants" trying to position themselves as Cloud players, Sun
Microsystems can be considered as the biggest loser. They started off the year on a very
promising note with soundbites about their plans to offer a public cloud similar to Amazon Web
Services but much more "open" than Amazon Web Services. Their briefings excited many of the
pundits in the cloud blogosphere. Then, Oracle announced their plans to acquire Sun
Microsystems and everything went quiet on their side. But, as late as April, they assured that
everything is on track with their cloud strategy. However, by June, we started hearing about
how they have put their plans on hold in order to reprioritize their strategy. Since then, we
haven't heard anything significant from them except some really good whitepapers on cloud
security, usecases, etc.. Even though it is too early to write them off, I think they have lost it.
The Oracle's acquisition of Sun Microsystems doesn't appear to bode well for their cloud
computing plans even though some people I spoke to after the announcement of the merger
are confident about Sun's cloudy future.

GoGrid: Even though some of the pundits were not so sure of GoGrid's ability to crack the IaaS
market, I was pretty excited about them because they made some right moves early on. They
offered free load balancing even before some in the AWS team heard about the term. If my
memory is correct, they are the first ones to offer what we now call as Virtual Data Centers.
More importantly, thanks to the then CTO Randy Bias, they offered their API specifications
under creative commons license, thereby, empowering their clients and ecosystem players. In
spite of all these right moves, their market position is still very weak and I am not seeing
anything to suggest that it can be turn around quickly. I also feel that Rackspace's entry in the
field has affected their position as an Amazon alternative.

Bungee Connect: This PaaS provider started off with very high expectations from the pundits
and, at that time, it appeared that they are going to revolutionalize the way we develop and
integrate applications on the enterprise side. In fact, they can be called as one of the early
PaaS pioneers. Ever since the early buzz, I haven't come across any news/information that
really excited me. Even though I am making a guess here, I think Bungee Connect can be
tagged as a "loser".

These are some of the vendors whom I thought were going to stir up the marketplace but lost
steam on the way and, possibly, going towards a big thud. All three of them can still turn
around and make big but their journey is going to be really difficult. Even though the emotional
side of my brain wants them to win, the rational side tells me that they have lost the
opportunity.

Neither Winners Nor Losers in 2009

After talking about the winners and losers of 2009, let me briefly talk about some of the cloud
computing providers who are neither the winners nor the losers in the year 2009. The fortunes
of these companies could go either way based on various market conditions, their strategies,
execution, etc..

Microsoft: The winner of the previous desktop computing era is struggling hard in this era of
cloud computing. Well, they are not struggling hard in terms of their cloud offerings. After
trying to resist cloud computing initially and dismissing it as a non starter, they came around to
offer a compelling set of services that has the potential to get the enterprises excited. There is
no doubt about the market potential for their Azure based services but I have placed them in
the neutral category for entirely different reasons. This only happens to very few companies in
this world. Their success in the cloud era is directly dependent on the loss of their existing cash
cow. The issue is not about whether Microsoft can win the cloud game. If they go all out in the
market, they will definitely emerge as a winner. The issue is about how they can win the cloud
game while killing the products that are currently filling up their coffers. The very success or
failure of Microsoft in the cloud era depends on how they are going to manage this situation.
Remember, Microsoft has too much fat in terms of employee number to be agile in the cloud
era. Trimming this fat will put a dent on the employee morale and will make Microsoft
unattractive for younger talents. This, in turn, will make it difficult for Microsoft to innovate in
the fast moving cloud marketplace. Already, people are talking about whether the old age of
Microsoft employees are affecting their ability to innovate. This is a tricky situation and the
very success of Microsoft is dependent on how they overcome this dilemma. On the SaaS Office
Suite side, Microsoft is clearly going to end up on the losing side as they cannot fight the free
offerings from Google and Zoho (disclaimer: Zoho is an exclusive sponsor of Cloud Ave, a blog
where I am a contributor).

Joyent: Joyent has been offering infrastructure for web applications even before many of us
heard the term cloud computing. To defend themselves against the onslaught of what we now
call as cloud economics, from players like Amazon Web Services, Joyent repositioned
themselves by offering highly optimized vertical offerings like MySql Accelerator along with
others like Cloud Control and Joyent Smart Platform. At one point, it appeared that Joyent can
attract startups and medium enterprises with products like MySql accelerator. Sadly, Amazon
gave a big blow with the release of Amazon RDS, affecting Joyent's very selling point on MySql
Accelerator. With a partnership with Zeus and fresh infusion of cash, Joyent isn't going
anywhere in the near future. But their long term success will depend on how they position
themselves in the coming year.

Open Cloud: There were some hopes for openness in cloud computing during 2009 but nothing
significant hasn't materialized in terms of standards. The idea of open cloud got unexpected
support from Microsoft. But Microsoft speaks a different language when they are down and
faced with the difficulty of catching up the leader compared to the language they speak when
they are in a dominant position. I wouldn't give so much importance to Microsoft's call for
openness. However, the open cloud evangelists should be worried about VMWare's embrace of
cloud computing. Their dominance in the enterprises has the potential for making openness, in
its purest form, irrelevant in the cloud marketplace. It is time for vendors like Amazon and
Google to push openness wholeheartedly. Otherwise, we will be waging another battle in the
later part of the next decade much like what we waged against Microsoft in the desktop era.

It will be very interesting to see how these companies fare up towards the end of 2010.
Definitely, this year is crucial for them. We can just wait and see what happens to these
companies. 2009 has been a great year for cloud computing and I am sure 2010 will see further
enterprise adoption of cloud computing with a stronger emphasis on openness.

Relevant Vendor Links:

1. http://aws.amazon.com
2. http://www.sun.com
3. http://www.gogrid.com
4. http://www.bungeeconnect.com/
5. http://www.microsoft.com
6. http://www.joyent.com