If you're an enterprise software vendor today, there's only one company to fear: Amazon. VMware CEO Pat Gelsinger perhaps said it most honestly ("if a workload goes to Amazon, you lose, and we have lost forever"), but the sentiment is widely shared -- or it should be.
After all, AWS (Amazon Web Services) plays by different rules, spoiling the comfortable margins and business models of yesterday. While AWS used to confine itself to the relatively small IaaS market, it now dabbles in everything from email and calendaring systems to document storage services and various PaaS solutions.
Indeed, as Amazon CTO Werner Vogels has declared, AWS is in the "business of pain management for enterprises," and there's plenty of pain to go around.
The one company that seems capable of withstanding AWS, both in the public cloud and in private data centers, is Microsoft. Written off as irrelevant by many, Microsoft is making a comeback and may be the biggest threat to AWS's plans for cloud domination.
Public cloud all the way down
For years, Amazon has had the cloud largely to itself, though enterprises have not exactly rushed to embrace it. Developers may love the convenience of public clouds like AWS, but CIOs have been relatively skittish, preferring to experiment with private clouds.
That experiment failed. Not completely, mind you, but according to a recent Gartner survey of IT executives with private clouds in place, 95 percent of private clouds fail. That's an amazingly large proportion.
There are as many reasons for private cloud failure as there are private clouds, but the biggest seems to be the same explanation offered by AWS executive Andy Jassy years ago: Private clouds perpetuate all the problems traditional IT infrastructure has always had. They're difficult to deploy and manage, resulting in an infrastructure that's costly and inflexible.
Small wonder, then, that Rightscale's annual 2015 State of the Cloud report shows a distinct preference for public cloud within the nearly 1,000 enterprises polled:
- Public clouds are used by more organizations, while private cloud runs more workloads: 88 percent of organizations use public cloud compared with 63 percent that use private cloud; 13 percent of enterprises run more than 1,000 VMs in public cloud, while 22 percent of organizations run more than 1,000 VMs in private cloud.
- Significant headroom for more enterprise workloads to move to the cloud: 68 percent of enterprises run less than a fifth of their application portfolio in the cloud; 55 percent of enterprises report that a significant portion of their existing application portfolio is not in cloud, but is built with cloud-friendly architectures.
- Private cloud stalls in 2015 with only small changes in adoption: Respondents reported minimal changes in adoption of private cloud technologies from 2014. VMware vSphere continues to lead with 53 percent of enterprise respondents reporting that they use it as a private cloud. Enterprises use of OpenStack shows the largest increase for 2015, growing by 3 percent. The new Azure Pack offering shows strong adoption in its first year, used by 11 percent of enterprises.
Yes, enterprises still have hybrid cloud strategies most of the time (82 percent in 2015 compared to 74 percent in 2014), but "hybrid" often seems to have less to do with "running workloads across both private and public clouds" and more to do with "using public clouds for some workloads and data centers for others."
As seen in the Rightscale data, companies are still keeping a big chunk of their workloads behind the firewall. But it's also the case that the majority of workloads have yet to move to the cloud.
When they do, the public cloud will be the preferred destination, where AWS enjoys a huge lead.
Can anyone stop Amazon?
According to the RightScale survey, 57 percent of enterprises choose AWS, while Azure claims only 12 percent. (Other market share data has Azure at 10 percent.) Though this Azure number is a significant step up from 2014, when it earned merely 6 percent market share, it still pales in comparison to AWS -- that is, until you consider enterprise customers.
Among the CIO set, Azure's IaaS (infrastructure as a service) offering shows 19 percent adoption, compared to AWS at 50 percent. This isn't surprising, given that Microsoft never lost its mojo with CIOs. As a 2013 Piper Jaffray survey of IT executives revealed, 45 percent of executives picked Microsoft as their top vendor, more than double what the second-place vendor (Oracle) scored.
Even as the rest of the market scurries to catch up with AWS -- witness the partnership between Google and VMware, an attempt to stop AWS at any cost -- Microsoft will do fine on its own. As my colleague Eric Knorr highlighted in a previous post, Microsoft is second only to AWS in cloud mind share, which increasingly translates into gathering market share:
With public cloud growing much faster than private cloud, the only real chance we have of cloud competition is Microsoft. Yes, as ironic as it is to suggest that Microsoft is a force for competitive good (anyone remember United States vs. Microsoft?), it's true.
AWS created the market. Now it's Microsoft's turn to make it competitive.
Microsoft will do this by turning CIO fealty into cloud adoption. Those same skittish CIOs referenced above will trust Microsoft to take them to the cloud more readily than they will AWS, despite its popularity with developers. That's a real competitive advantage.
Still, Microsoft still needs to make some fixes. As Gartner analyst Lydia Leong pointed out late last year, "Microsoft's disastrous inability to keep Azure outages confined to a single region is a major red flag for enterprises considering Azure." That is, while Microsoft will be given opportunities to prove itself with cloud-hungry enterprises, it still has a way to go to present a convincing case.
But there's time, and fortunately for the public cloud, there's finally competition. This is good for AWS and its customers because it will drive the cloud leader to push itself even harder.
Whichever vendor ends up winning, the biggest winner of all will be enterprises, which will have two excellent choices in the cloud, both offering the scale, innovation, and market penetration to lead.