Will There be Thousands of Cloud Providers?

As Internet titans Amazon, Microsoft and Google build enormous data centers to support their cloud computing operations, there's been much discussion about what the cloud will look like. Will cloud computing be dominated by a handful of companies with the resources to build massive server farms?

Gartner laid out a very different vision in this morning's keynote at the Gartner Data Center Conference in Las Vegas. Gartner VP Thomas Bittman predicted that cloud computing will eventually support thousands of specialized providers, creating the need for a cottage industry of specialists to assemble client solutions from a smorgasbord of cloud offerings.

"In the future, we expect to see thousands of providers in the cloud," with services being "put together like Lego blocks," Bittman predicted. "We're moving from this monolithic, 'one provider does everything' model to an ecosystem. We're moving toward a more distributed, open world, and toward more customized services. We believe there will be a large number of mid-sized providers."

The proliferation of specialized cloud computing services will provide opportunities for companies function as service brokers for end users, Bittman said, citing systems integrators and value-added resellers (VARs) as likely candidates to assume this role.

Many larger companies will assemble in-house teams to manage specialized cloud service providers, Bittman said. "In the enterprise we see the need for dynamic sourcing teams. In five years, most of you will have a group responsible for managing sourcing (from cloud providers)."

I'm sure we'll hear more about Gartner's assessment of cloud computing in the next several days. But I'm not sure this vision accounts for the likely consolidation as the industry's largest players seek to assert their dominion over the emerging cloud.

IBM, HP, Dell and Cisco have been quick to acquire companies that could boost their fortunes in niches like data center management or green IT. It stands to reason that the same trends will emerge with cloud providers, as companies with promising technologies get scarfed up by bigger fish seeking to build cloud portfolios.

Reuven Cohen at Elastic Vapor made this point last week after IBM announced a suite of cloud consulting services. "For me, what IBM actually announced today was that we now have a major acquisition partner for the various cloud computing startups being created," Reuven wrote. "More simply, on the business plan page titled 'exit strategy', you can now include IBM."

Another issue is whether the current economic environment will accelerate merger and acquisitions activity in the cloud space. Rackspace's acquisitions of JungleDisk and SliceHost could easily become a template for additional deals in which larger companies with ambitions and cash assemble a cloud portfolio through acquisitions, especially if promising companies run low on cash. That's not unthinkable for cloud providers with a large number of venture-backed startups in their customer base.