In Cloud Market, Arming David May Be the Way to Take Down Goliath

Since the beginning, a big question about cloud computing is how the ecosystem will evolve. Will there be only a handful of superpowers (e.g, Amazon, Google and Microsoft) that possess the knowledge and money to operate at a large scale, or, will there be dozens of providers in the mix, specializing in dozens of different infrastructural areas and vertical markets? Finally, as mainstream providers have begun segregating into the IaaS and PaaS camps, it seems we’re getting close to an answer.

Engine Yard provides a prime example of how the market might play out. The company already hosted its Ruby on Rails PaaS offering, AppCloud, on Amazon Web Services, but last week it partnered with Terremark to roll out its enterprise-grade xCloud offering. The benefits it gets from each provider are passed on to customers, along with prices to match. Of course, Engine Yard isn’t the first specialty cloud provider to rely on the big boys for infrastructure.

As I discuss in my weekly column at GigaOM Pro, this seems to be the direction the market is moving; large IaaS providers — such as Amazon and Terremark — could end up serving as arms dealers for cloud specialists like Engine Yard. As IT consumers begin demanding increased automation of PaaS, and as demand for SaaS applications spreads, providers of these services will need infrastructure to house them, and large providers have plenty to sell.

I’ve been adamant recently that AWS, in particular, needs to offer its own PaaS to compete with growing cloud competition from IT goliaths like Google, Microsoft and, to a lesser degree, Salesforce.com, but that doesn’t necessarily have to be the case. If Amazon can undermine those companies by arming their competitors — not to mention any and every other flavor of cloud service — with infrastructure, maybe that’s profit enough.

When all is said and done, Google, Microsoft and Salesforce.com might be battling it out for PaaS (and SaaS) dollars against a whole slew of smaller providers operating within the infrastructural confines of AWS, Rackspace, Terremark and Savvis. I’m not making a prediction, but this does seem like a possibility.

Read the GigaOM Pro post here. Also, plan to attend Structure 2010 or watch the live stream to hear a lot more about the cloud market from thought leaders at the vendor, provider and user levels.

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