About a year ago, I wrote a post comparing cloud computing providers to fast-food chains. I called Amazon(s amzn) Web Services the McDonald’s of the cloud, Rackspace(s rax)the Wendy’s and Google(s goog) — in a close third place — the Burger King. Since then, Google has been steadily creeping up on Rackspace and, on Tuesday, it blew the doors off with massive price cuts, progressive pricing models, and new features that firmly established Google as a visionary and AWS’s primary competition.
Google’s newfound cloud prowess was the major theme of our Structure Show podcast this week. Barb Darrow and I discussed reactions to the news and what it means for other top-tier cloud providers such as IBM(s ibm) Softlayer, Microsoft(s msft) and Rackspace. Our guest, Ben Whaley of Anki (it makes an artificial intelligence-based toy racing system), said that although his startup is a happy AWS shop, Google looks a lot better now than it did a week ago.
If you listen to the whole thing (embedded below), you’ll probably get the sense the cloud market, at least in terms of who’ll have the most users, is really a two-horse race. It seems safe to assume Microsoft will find a niche (probably a big one) and be successful with the newly Windowless Azure. IBM Softlayer is doing some interesting things, especially around Watson as a service, and should be a strong revenue source for Big Blue.
Rackspace, well, it’s in a tough spot. Between “enterprise” clouds squeezing it on one end, and the more-innovative, always-price-slashing AWS and Google (AWS matched Google this week with cuts of its own) on the other end, it’s hard to see how it can continue with its current strategy. In this case, being in the middle is less a case of providing the best of both worlds, and more a case of being trapped in a nether region with no easy escape to either world.
However, the one thing we didn’t discuss in any great detail is what Google’s ascendence means for the smaller cloud providers out there — the Joyents and GoGrids, and the hot new startups such as Digital Ocean. These classes of providers are often specialists in one thing or another, and usually pretty innovative. Right now, they might even be less expensive than Google and AWS.
But the price and feature wars between those two giant companies are going to make life a lot harder for the small guys.
One could compare it to the client-server era, where large server makers dominated in terms of market share and revenue, but there’s a big, big difference in the cloud era. Rather than use their dominance to extract more money from users, Google and AWS are constantly cutting prices thanks to economies of scale and their efforts to minimize the cost of running their massive data centers. When they launch new features and services — which they do regularly — they’re either free or complementary, but never rolled into the price of the core services.
Cloud computing users must be pleased as punch to see all this competition at the high end — forcing AWS, Google, Microsoft, and IBM to race to the bottom on pricing and to the top on features — but other cloud providers must be sweating bullets. Maybe they have immutable advantages I’m ignoring, but nothing seems too defensible given the big guys’ deep pockets, top-tier technologists and willingness to accept low(ish) margins. What’s an advantage today is table stakes tomorrow, which means there’s really no time to rest.