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Gartner's Magic Quadrant 2014 For Cloud: Winners & Losers

Gartner's annual graphic of competitive positioning among tech providers reflects challenges for Rackspace, Dimension Data, and some other vendors.

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Gartner's Magic Quadrant 2014 for cloud computing makes it clear that Amazon has maintained its leadership position and Microsoft has moved up the ranks. But what happened to Rackspace, Dimension Data, and others that were in last year's Challenger quadrant and became this year's Niche Players?

Perhaps most puzzling is the awkward position of Rackspace, which has been a thought leader in cloud computing, co-founder of the OpenStack cloud open-source project, and one of the first major implementers of an OpenStack public cloud. However, management changes, a sinking stock price, and an announcement that a buyer might be sought through Morgan Stanley all combined to signal a retreat from the spotlight.

Some observers have noted that Rackspace is a company in transition. Managed hosting still comprises the bulk of its business, but its customer base is transitioning to cloud computing. Rackspace also has expertise in supplying Microsoft Exchange and other applications as software-as-a-service to enterprise customers.

The team of Gartner analysts who compiled the Cloud Computing Magic Quadrant report said Rackspace has had a "developer-centric offering" that has appealed primarily to small businesses that seek to replace their low-cost hosting service. Rackspace delivers a solid set of basic features, they explained, but it has not been able to keep up with the pace of innovation of the market leaders. Severe price cuts by Google, Amazon Web Services, and Microsoft also affected its ability to make money from its cloud offerings.

[What did Gartner have to say about other cloud vendors? See Amazon, Microsoft Star In Gartner Cloud Magic Quadrant.]

Instead of competing in the hyperscale IaaS market and repeatedly cutting prices, Rackspace "is refocusing its business on customers that need expert managed services for mission-critical needs," Gartner's analysts wrote. These customers need hybrid cloud services that also require Rackspace's high-touch "fanatical support," which is not available in the bare-bones infrastructure market.

In making this shift, however, Rackspace will be competing with IBM, CSC, Accenture, and HP, which are bringing outsourcing skills into the cloud marketplace in their own offerings and those of Amazon, Microsoft, and others. Several of these providers are skilled at using inexpensive offshore labor to make their outsourcing and management services more competitive.

Rackspace has acquired a number of cloud companies but has not integrated these acquisitions into a cohesive whole, Gartner's analysts cautioned. While the company is potentially positioned to help customers use multiple clouds -- other vendors' as well as its own -- it's still struggling to convince cloud users to use its own Rackspace Cloud.

A lesser-known cloud supplier, Dimension Data, was in the Challenger quadrant last year; this year it dropped into the Niche Player quadrant. Dimension Data, a unit of Japanese telecom supplier NTT Group, has a reputation for consistent performance that could make it a highly successful niche player. With a large presence in Japan, the US, the UK, the Netherlands, Hong Kong, and South Africa, it offers both public and private cloud services out of a single, unified architecture. The company also encourages third parties to provide cloud services on top of its architecture under their own labels.

While Dimension Data offers a VMware-based virtual machine, it does not rely on VMware's vCloud suite of service management software -- instead it produces its own to hold down costs and maintain its own pace of innovation. In doing so, Gartner reports,

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Charles Babcock is an editor-at-large for InformationWeek and author of Management Strategies for the Cloud Revolution, a McGraw-Hill book. He is the former editor-in-chief of Digital News, former software editor of Computerworld and former technology editor of Interactive ... View Full Bio

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User Rank: Author
6/5/2014 | 1:35:20 PM
Re: Cloud price cutting is cutting out some competitors
As Charlie has noted, the winner in the cloud price war looks to be Google either way. Even if Google doesn't steal a ton of AWS customers, it has eroded Amazon's profit margin -- and Amazon needs the $ more.
Li Tan
Li Tan,
User Rank: Ninja
6/5/2014 | 10:58:49 AM
Re: Cloud price cutting is cutting out some competitors
The competition is really fierce, which is good for the consumer. However, there is another concern - will the service quality be jeopardized? The pure price war cannot last for long and it's one of the worst kinds of competition.
User Rank: Ninja
6/5/2014 | 12:44:29 AM
Re: Cloud price cutting is cutting out some competitors
Amazon, along with its competitors created the price-war that made prices to drop for the consumers of IaaS, and this resulted in profit margins to shrink. If Rackspace was a bit more like, and had a solid software environment to go along with its hardware offering, then it would have been difficult to force a company like Rackspace to take a step backwards.  
Charlie Babcock
Charlie Babcock,
User Rank: Author
6/4/2014 | 3:30:25 PM
Cloud price cutting is cutting out some competitors
Those forced to take a step backward, such as Rackspace, in this release of this Magic Quadrant, illustrate how hard it is to compete in the new era. The builders of new, giant infrastructure can cut prices repeatedly; you can't.

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