Although demand is increasing for cloud services, buyers are more interested in cloud infrastructure tuned to their specific needs, particularly through on-premises, private cloud computing or single-tenant services from the public cloud.
That's one of the more surprising conclusions from a fourth quarter 2014 survey by TBR Research, formerly known as Technology Business Research. Analysts Alan Krans, Jillian Mirandi, Matt Healey, and Cassandra Mooshian collaborated on the report, TBR 2015 Cloud Predictions. Customers have debated multi-tenant public cloud versus single tenant (meaning a company has only its workloads on certain hardware, which it does not share with other companies). TBR contends the momentum is on the side of single tenant, and that may favor suppliers heretofore in the background, such as IBM Softlayer, HP, and smaller cloud suppliers. "The market is shifting to provide services that are customizable for the individual end customer," the report says.
Amazon, Rackspace, Microsoft, SoftLayer, and HP all offer single-tenant cloud infrastructure options, as do many smaller regional players, such as Bluelock out of Indianapolis and Peak in Denver. TBR expects revenue to grow in this private cloud are at more than 20% year-on-year in 2015.
[Want to see how Amazon competes on something other than price? See Amazon Trumps Microsoft With C4 Virtual Servers.]
Here are four other cloud predictions by TBR:
More price drops and strategy shifts among IaaS vendors
For one example, see what's happening in storage pricing.
In IaaS servers, public cloud is less differentiated and becoming more of a commodity based on price. TBR predicts vendors who can't cut prices will leave the market or sell their businesses (though it didn't name any particular vendors).
Rackspace has made a pricing and product strategy shift, for example -- reducing its emphasis on public cloud services in mid-2014, while continuing to offer them. Instead it put more emphasis on the managed services side of its business.
TBR didn't predict how such consolidation might take shape. Smaller service providers might be happy to sell their business units in a market with declining prices, while Google, Amazon, Microsoft, and IBM seem to be investing with the hope of cloud services profits down the road. It's hard to believe any one of them will sell out in 2015.
Cloud infrastructure shifts to cloud managed services
TBR predicts a rise in managed services channel partners that can transfer customers to public cloud platforms. It predicts customers will move from a traditional managed services model -- renting a fixed data center space -- to one more like Rackspace, where customers may choose a fixed set of computing resources or buy on-demand infrastructure, and get cloud-like self-provisioning with either one. TBR expects managed service provides to differentiate with more guidance, configuration, and ongoing management to help customers implement what they need.
TBR also expects growth in industry-specific clouds. "Community clouds use technology from large horizontal applications; combine it with industry-specific technology to create a cloud that addresses the needs of a particular vertical," the report states.
OpenStack will lag
TBR is aware of but not too impressed with all the effort behind the OpenStack open source cloud management software. Early adopters such as Comcast, The Gap, and others are have implemented private clouds based on OpenStack, and HP is a supplier built on OpenStack infrastructure. Use of OpenStack will increase, but "it will not have a market impact in 2015," the TBR analysts predict. "Without a more standard, unified code base, mass migration will be limited," they wrote.
Amazon growth will slow
TBR thinks early public cloud leaders, including AWS, will experience a revenue slowdown as prices drop and customers move to competing options. The early, fast revenue gain "was mainly driven by demand and a lack of competition, a situation that is not going to continue," the authors conclude.
A counterpoint to that conclusion is that Amazon is no longer competing simply on a flat infrastructure-as-a-service. As it demonstrated at its Re:Invent conference in November, it's capable of adding many more services on top of its infrastructure. For example, it added a container launch service, encryption key management, a code configuration service, and a code deployment service, as well as Aurora, its own relational database service. Its growing emphasis on services rather than prices may indicate it no longer wants to lead the price-cut parade.
A second, related, long-term prediction is that the cloud market is moving out of early adopter stage into its "early majority" phase, where a majority of enterprise IT departments are using it. This maturity will lead to a fragmented service market, as vendors try to differentiate.
At first glance that already appears to be becoming true with Amazon's emphasis on new services. Google and Microsoft have been quick to add new services of their own. Microsoft's Azure has added encryption key management, while Google has added a container registry.
Our latest survey shows growing demand, fixed budgets, and good reason why resellers and vendors must fight to remain relevant. One thing's for sure: The data center is poised for a wild ride, and no one wants to be left behind. Get the Research: 2014 State Of The Data Center report today. (Free registration required.)