Cloud Crosswinds Ahead as Behemoths Battle on Price

Ted Chamberlin is vice president, market development, cloud for Coresite.

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With the recent announcement from the Microsoft Azure camp stating “ its commitment to price match Amazon Web Services prices for commodity services like compute, storage and bandwidth, aligned with the general availability of Windows Azure infrastructure services,” the official race to zero begins in the Infrastructure as a Service market. This shot across the bow of AWS will most definitely bother AWS, but it should scare the stuffing out of the rest of the IaaS market. Particularly the providers who the traditional businesses trust a bit more for more enterprise-ish workloads should be concerned.

Providers like GoGrid, Tata, Savvis, Terremark, Rackspace Cloud and others just entering the market will face the heavier crosswinds as these behemoths engage battles. The stark reality is that hyper scale providers like Amazon use their operational acumen and scale to drive pricing down on IaaS services on a regular basis. This will create an exceedingly tougher environment for the rest of the cloud providers to compete. How is an IaaS provider to thrive, yet alone, survive?

The Power of Community

Many of these market entrants have the solution already teed up in the data centers. Many companies will choose their colocation, hosting or cloud providers based upon the current occupants in those facilities so that they can trade traffic, conduct commerce or just inhabit a robust ecosystem.

The next step in this evolution is to develop these neighbors into a fully-fledged community where users can vote/nominate who enters the community and freely conduct business in these exchanges. The community clouds truly contain elements that represent the best of both worlds in cloud adoption, scalability and exclusivity.

According to my alma mater Gartner, "Private Cloud Computing is among the highest interest areas across all cloud computing according to Gartner, with 75% of respondents in Gartner polls saying they plan to pursue a strategy in this area by 2014.” Many enterprises understand cerebrally that public cloud scale is a key enabler tor growth, but many still are uncomfortable moving critical, compliant and sensitive workloads to public.

Community clouds, although still nascent in the landscape will start to provide the benefits or interconnect and limited participation that will help companies move of those workloads to a community cloud. These communities of like-minded organizations also represent a departure from commodity, low cost, low value services. They value of the community rises as the participants -albeit the correct ones-join the community.

Operators and enablers of cloud communities also have value-based roles to play such as providing the interconnect services, advertising the services of the community as well as developing and managing of those hardware and software stacks. The U.S. government’s Fed RAMP initiatives has test driven the community cloud for government agencies and partners, and despite the less then atomic pace that the Federal government exhibits, growth is starting to show in Federal cloud initiatives.

Next up? Potentially digital media clouds, expansion of financial services low latency communities and healthcare exchanges. All of this potential commerce and transaction in these communities represent a way for differentiated, value based IaaS services that will help to slow down the race to zero so that everyone carve out their own revenue opportunity in the new world order of cloud series.

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