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IaaS in 2016: Who can challenge Amazon?

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As businesses of all sizes migrate ever more workloads to cloud-based infrastructure, we examine the dynamics of this rapidly changing market.

By Charles McLellan | August 15, 2016 — 15:19 GMT (08:19 PDT) | Topic: Cloud Computing: Moving to IaaS

Infrastructure as a service (IaaS) is a maturing segment of the cloud computing market. In its 2015 Cloud Computing Hype Cycle, Gartner placed IaaS on the ‘Slope of Enlightenment’, which is the last stage before mainstream adoption (a.k.a the Plateau of Productivity).

Also approaching the SoE is ‘IaaS+’, which provides additional services on top of basic compute, storage, and networking (such as database services and content delivery networks) but falls short of those offered by full-blown PaaS (Platform as a Service) providers. Meanwhile, ‘Private IaaS’ (single-tenant cloud infrastructure, hosted by a provider or on the client’s premises) currently languishes in the Trough of Disillusionment.

The dominant IaaS player in the public cloud is Amazon Web Services (AWS), which launched in 2006 with EC2 (compute) and S3 (storage) services. In Amazon’s most recent quarterly results (Q2 2016, ended 30 June), AWS generated $2.9 billion in revenue, representing 58 percent year-on-year growth:

AWS’s $2.9 billion is just 9.5 percent of Amazon’s total $30.4 billion revenue for Q2 2016 — but it’s a profitable segment, generating $718 million in operating income for the company.

AWS’s market dominance in cloud computing is based on its long track record and extensive feature set, which has given some companies the confidence to abandon traditional IT infrastructure altogether. In his keynote at the 2015 re:Invent conference last October, Andy Jassy, then senior VP (now CEO) in charge of AWS, highlighted the number and breadth of organisations that are going "all-in" on the company’s cloud services. These pioneering organisations — among them are well-known companies like Netflix, Intuit, and Juniper — are decommissioning their private datacentres and running their businesses entirely on AWS’s on-demand compute, storage, networking, and other services. Until recently, such a strategy would have been regarded as madness by most CTOs.

Amazon may be the dominant public cloud infrastructure player, but there are plenty of would-be challengers, including Microsoft’s Azure and Google’s Cloud Platform.

According to Gartner, AWS supports a broad range of use cases (including enterprise and mission-critical applications), has attracted an ecosystem of open-source tools and a network of partners, and is a mature yet agile cloud provider that’s the "safe choice" for customers seeking rich functionality and a long-term market relationship. On the downside, Gartner notes that customers will require expertise (either in-house or via professional services) to get the most from AWS’s multiple offerings, and that its granular price structure is complex.

Microsoft, which entered the IaaS market in 2013 with Azure Infrastructure Services, is praised by Gartner for its good integration of IaaS and PaaS (Platform as a Service) components that seamlessly extend and interoperate with on-premises Microsoft infrastructure. Azure is less feature-rich and less mature than AWS, but it’s growing fast and its pricing is comparable. However, Gartner notes that some enterprise-class functionality is yet to be fully implemented, documented, and supported, and that third-party Azure experts are currently limited in number.

Google also entered the IaaS market in 2013, with Google Compute Engine. Gartner sees Google’s ability to run technology platforms at scale — honed on its internal operations — as a key advantage, along with a comprehensive vision for, and experience with, the lifecycle management of cloud-native applications. Big data, analytics, machine learning, and batch computing are also key strengths. Where Google lags AWS, Microsoft is in the breadth of its feature set, which is missing some capabilities both for large organisations and startups, says Gartner. Google is also still learning to engage with enterprise and mid-market customers, according to the analyst firm.

How big a pie are these and other cloud providers competing for?

Gartner estimates that worldwide market for public cloud services will be worth $204 billion in 2016

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