The public cloud market is booming. Global spending on cloud infrastructure should approach US$16.5 billion in 2015, a rise of more than 32 percent from the previous year, according to research firm Gartner.
And yet in its latest Magic Quadrant Infrastructure-as-a-Service report, Gartner describes the cloud landscape as one with "brutal competitive dynamics" – a market in which many providers are changing strategies after failing to gain traction.
That means enterprise buyers must be especially wary when choosing a provider, not only considering the services they currently offer, but their roadmap to evolve their strategy and technology.
Gartner also recommends cloud buyers adopt a bimodal strategy that allows them to maintain critical IT operations while innovating on agile development platforms.
The Gartner Magic Quadrant ranks cloud vendors on two criteria: 'Ability to Execute' and 'Completeness of Vision'.
Execution is represented on the Y-axis of Gartner's chart, and vision on the X-axis. That lands competitors into one of four quadrants on the chart: Niche Players (low in both criteria), Visionaries (complete vision but lacking execution), Challengers (good execution but lacking vision) and Leaders (excelling in both vision and execution).
Among the 15 providers evaluated this year, none fell into the Challengers quadrant. And only industry powerhouses Amazon Web Services and Microsoft landed in the Leaders quadrant, leaving all others as Niche Players or Visionaries.
Next: Amazon Web Services
Leader: Amazon Web Services
Still ranked highest in both ability to execute and completeness of vision, the AWS cloud juggernaut rolls on. Gartner noted that AWS has 10 times more compute capacity being used by customers than all other 14 providers in the Magic Quadrant combined.
AWS, serving an "innovative, agile and responsive market", also remains the industry's pre-eminent thought leader, according to Gartner. Its diverse customer base supports "the broadest range of use cases, including enterprise and mission-critical applications".
Although Amazon is beginning to face stiffer competition from the likes of Microsoft and Google, its public cloud retains a multiyear competitive advantage, Gartner stated.
AWS' dominance has helped attract a large technology partner ecosystem to integrate into the platform.
"It also has an extensive network of partners that provide application development expertise, managed services, and professional services such as data centre migration."
AWS still has the richest array of IaaS- and Platform-as-a-Service-like capabilities. "It continues to rapidly expand its service offerings and offer higher-level solutions."
AWS isn't always an easy vendor to manage. "Customers must ensure that they receive the level of sales and solution architecture engagement they need to be successful."
Also, Amazon's new capabilities compete with products and services offered by its own partners.
"Though this is normally positive for customers, it creates ecosystem conflicts that AWS must continue to manage carefully."
CenturyLink has leveraged its Tier 3 and Savvis acquisitions of recent years to become a major player in the cloud market. Gartner ranked the CenturyLink Cloud high on the criteria of Completeness of Vision, placing the telecom giant in the upper corner of the Visionaries quadrant.
The company recently expanded into Australia through a partnership with NextDC and plans to deploy public cloud services later this year.
The telecom's cloud platform is rooted in the ability to deliver a wide range of capabilities in an accessible fashion.
"CenturyLink has a compelling and distinctive vision of application-fluent infrastructure that spans network, compute and storage capabilities."
While aiming for the data centre outsourcing market, CenturyLink continues to offer a strong self-service feature set, combining for an effective hybrid portfolio.
"CenturyLink has a track record of successfully delivering enterprise-class solutions, including managed security services."
CenturyLink may have an ambitious vision backed by significant investments, but "it is competing against many other providers who are also investing deeply, including market leaders with much more extensive engineering resources".
CenturyLink's roadmap "may not be sufficiently aggressive for the pace of the market."
Next: IBM SoftLayer
Visionary: IBM SoftLayer
IBM's advantages in the cloud market are rooted in its comprehensive portfolio of public, private and managed cloud products. But the hybrid focus is anchored by SoftLayer, the public cloud it acquired two years ago. IBM has launched two SoftLayer points of presence in Australia, first revealing a co-location arrangement in Melbourne in August 2014 and then opening its Sydney PoP in March.
Gartner classified IBM as a visionary on the strength of its many interoperable products and services, as well as its consulting and outsourcing capabilities.
But Big Blue barely crossed the threshold into that quadrant on the 'Completeness of Vision' axis, and it's ranked lowest in the quadrant when it comes to its ability to execute.
SoftLayer, one of IBM's first forays into the self-service and small- to medium-size-business markets, will be the common hosting platform for IBM's services in the future.
"IBM believes the shift to cloud will radically transform its business over time, including altering its go-to-market strategy, with an increasing focus on online sign-up and self-service."
IBM's brand and global customer base will help drive a cloud-enabled data centre outsourcing business on top of SoftLayer.
Gartner noted that IBM did little to improve SoftLayer's feature set since last year, or to integrate BlueMix into SoftLayer, limiting the benefits of the Platform-as-a-Service.
Customers also have been reporting that SoftLayer's integration with IBM's managed service has not come far along.
Next: Microsoft Azure
Leader: Microsoft Azure
Microsoft's Azure public cloud has been growing faster than any other IaaS offering on the market. Microsoft has now solidly entrenched itself as the runner-up in market share behind Amazon Web Services.
Not counting AWS, Microsoft has more than twice the IaaS compute capacity actually used by customers than the 13 other providers in the Magic Quadrant.
Azure went live in Australia out of data centres in Sydney and Melbourne in October 2014.
Azure's IaaS and PaaS components operate and feel like a unified whole, Gartner noted.
"Microsoft has been rapidly rolling out new features and services, including differentiated capabilities" in line with a vision that extends into on-premise infrastructure, development tools and applications.
Microsoft also has an "aggressive roadmap."
Microsoft still hasn't introduced all the critical features needed to meet the needs of enterprises for security, availability, performance, networking flexibility and user management.
Customers are also concerned about the impact of many past Azure outages, "which may necessitate ensuring that critical applications on Azure have a non-Azure disaster recovery solution".
Microsoft's partner ecosystem is still relatively nascent. Many of the MSPs Microsoft has recruited still lack extensive experience with the Azure platform, "which could compromise the quality of the solutions they deliver to customers".
Niche Player: Rackspace
When Gartner released last year's Magic Quadrant, Rackspace was actively entertaining bids. But its high-profile acquisition plans fell through and, a year later, the hosting provider remains an independent company.
While Rackspace is still in the Niche Players quadrant, it is close to crossing the threshold on both axes and penetrating directly into the Leaders quadrant.
Since the decision was made to remain independent, Rackspace has successfully returned to its roots in emphasising its managed services expertise and high-level "Fanatical" technical support.
Rackspace is no longer targeting customers that want to self-manage exclusively, except in the context of its private cloud services.
"Rackspace's industrialised private cloud offerings are thoughtfully constructed, more automated than most competing offerings, and operated in a fashion that allows Rackspace to deliver reliable, well-supported services at economical prices".
Although Rackspace now delivers a solid set of basic features, it has not been able to keep up with the pace of innovation of the market leaders.
Rackspace has also failed to integrate the many cloud companies it has acquired into a cohesively functioning unit.
Google has been a cloud provider for a few years now, but it's easy to forget the tech giant entered the IaaS market only recently through its introduction of Compute Engine.
Unlike Amazon and Microsoft, Google sits in the bottom half of the Magic Quadrant, in the Visionaries quadrant. The search engine leader must make strides in its ability to execute before it will join its two greatest rivals in Gartner's Leaders quadrant.
Google got into the IaaS market a little late, but is gaining ground with an effective sales strategy that productises its vaunted computing capabilities.
"Google has a comprehensive vision for, and extensive experience with, how cloud-native applications are developed and managed through the life cycle."
While it offers excellent value and speedy provisioning, Google will truly differentiate itself with platform and manageability features, not price, in the long run.
Google "is still in the rudimentary stages of learning to engage with enterprise and midmarket customers".
It needs to earn the trust of businesses with attention to prospective customers and support for legacy workloads.
And for a provider pursuing a hybrid strategy that's open-source and partner-centric, Google still has a relatively nascent partner program.
Next: NTT Communications
Niche Player: NTT Communications
This Japanese telecommunications services giant, part of the NTT Group, offers two IaaS platforms to global customers: NTT Enterprise Cloud and Cloudn. They're typically brought to market through a managed services model.
NTT Communications ICT Solutions is also an active IT solutions provider in the Australian market, having brought together its three local divisions – Frontline Systems, Harbour MSP and NTT Australia – in November 2013.
NTT has a strong customer base in Asia to which it can sell cloud services. And the family of companies it belongs to brings built-in market opportunities and a large partner network.
"NTT Com also has a long track record in managed hosting and managed security services, and can deliver these solutions in conjunction with Enterprise Cloud."
NTT Enterprise Cloud does little to differentiate itself from other offerings. It has features that might entice developers, but is missing some that would make it more attractive.
NTT Com is preparing to unify its IaaS platforms by rolling out a next-generation cloud powered by OpenStack.
"While this represents a positive direction for NTT Com, it is a change that existing customers will have to navigate."
Niche Player: Interoute
A newcomer to Gartner's Magic Quadrant, this UK-based telecom offers a cloud built on CloudStack IaaS technology.
Interoute has tightly integrated its cloud services with its global network, which has broad coverage of the major European markets. That strategy of leveraging its networking reach and expertise can be a draw for customers that have complex distributed applications.
Interoute's cloud is limited to hosting mostly communications applications. The provider is depending on its partners to build higher-level services on its platform.
While it has jumped to a good start in building an ecosystem of software partners, Interoute is still lacking solution partners.
"Cloud IaaS is a very expensive market in which to compete, and Interoute will find it challenging to muster the resources necessary to accelerate its success in the market."
Niche Player: Joyent
Joyent impresses with efforts to innovate and develop new technologies, but the provider, a perennial Niche Player, is limited by size in a market dominated by tech giants.
Long an advocate of container tech, Joyent is reaping some benefits from the recent popularisation of the technology. It was one of the first providers to introduce a Docker-based container service, Gartner noted.
Gartner commended Joyent for its "pure focus on new, cloud-native applications, including mobile applications".
"Joyent places strong emphasis on application performance and takes a holistic approach to its delivery, including particularly deep portal-based performance analytics."
Developing your own technology, as Joyent likes to do, can make it tough to compete long-term against providers with greater resources.
Joyent's "feature set is strongly oriented toward cloud-native use cases, and it is highly developer-centric."
To gain share, Joyent will need to grow its ecosystem with more managed and professional service partners, according to Gartner.
"Although Joyent can take advantage of the growing Docker ecosystem, it must find ways to bring that ecosystem to its platform, and that ecosystem will not by itself be sufficient to support customer needs."
Next: Verizon Terremark
Visionary: Verizon Terremark
Telecom giant Verizon offers a complex array of cloud services across multiple platforms.
The Verizon Cloud, built on the backbone of Terremark infrastructure acquired in 2011, encompasses the telecom giant's data centre, cloud and security businesses.
Verizon Terremark has the longest track record in the market for offering an enterprise-grade cloud virtualised with VMware technology, according to Gartner.
"However, its competitive differentiators have eroded over time as competitors have caught up and, in some cases, surpassed it in feature development."
Verizon's attempts to build its next-generation platform have been ambitious and innovative in pursuing a software-defined strategy, even as they have somewhat fallen short of the company's goals.
But Verizon can serve a relatively broad range of use cases for basic cloud IaaS through its many cloud offerings.
Verizon lacks value-added capabilities. "It will need to invest very deeply in engineering, product development and its partner ecosystem, which means competing for scarce talent and the attention of partners."
That might be an uphill battle, since partners typically prefer to work with service providers with a larger market share, Gartner noted.
"For Verizon's cloud business to achieve its potential, Verizon needs to become relevant to business managers and application development leaders."
Niche Player: Virtustream
Virtustream, a pure-play cloud vendor, has developed its own platform technology to facilitate the hosting of production applications, both coming from traditional enterprise workloads and cloud-native applications.
The provider excels in hosting complex, mission-critical enterprise workloads, like ERP systems. Virtustream has close ties to SAP, an investor in the company.
Gartner commended Virtustream's "strongly consultative approach" and development of its own platform technology that enables consistent hybrid solutions.
Its expertise with SAP makes it a good choice for enterprise applications, especially ERP systems.
"Virtustream has been successful at winning large-scale enterprise deals, particularly those focused on SAP and that require managed service capabilities."
By targeting complex, mission-critical applications that typically are packaged with professional services, Virtustream somewhat limits its potential market. The provider hasn't developed the resources to compete for a broader range of workloads that are self-managed and offer a wider range of functionality.
"As a relatively small but innovative provider with unique intellectual property, it may be a target for acquisition," Gartner observed.
The virtualisation leader launched the VMware vCloud Hybrid Service, later renamed vCloud Air, late last year. VMware's public cloud crossed the threshold from Niche to Visionary (just barely) in this year's Magic Quadrant on the strength of VMware's dominance in the private data centre, which provides a large, built-in market for hybrid services.
As it is the market share and thought leader when it comes to virtualisation, VMware's brand, global reach and customer base position its public cloud well.
VMware went live with vCloud Air in Australia in March, with partners including Data#3, Macquarie Telecom, Telstra, Datacom, Deloitte, and Rackspace.
VMware is pursuing a strategy to drive vCloud Air adoption by leveraging its influence in the on-premise data centre through hybrid cloud.
"It wants to offer customers a consistent experience across VMware-based infrastructure, whether delivered as an on-premises virtualised environment or delivered as a cloud service."
Unfortunately, "vCloud Air has limited appeal to the business managers and application development leaders who are typically the key decision makers for cloud IaaS sourcing."
While VMware has a strong channel, solution providers have to learn to sell vCloud Air: "VMware has previously used service providers… but none of those providers attained true scale and they were not able to maintain the level of innovation necessary… Some of these partners are now reselling vCloud Air, which reduces channel conflict."
Next: Dimension Data
Niche Player: Dimension Data
The one-time VAR and system integrator dived into the cloud hosting market in 2011 after it acquired OpSource as well as Australian provider BlueFire.
Ranked lowest among the 15 providers Gartner evaluated for Completeness of Vision, Dimension Data remains a Niche Player in the Magic Quadrant.
Part of the NTT Group, Dimension Data has one of the largest global footprints of any cloud provider, playing alone in some global markets.
The cloud division is actually headquartered in Australia by Steve Nola, chief executive of Dimension Data Cloud Solutions.
Dimension Data engages its partners with a channel model that allows solution providers to white-label its Managed Cloud Platform.
At the same time, the platform offers a single, unified architecture across Dimension's own offerings and those of its partners.
The provider also offers sales and marketing enablement to its OneCloud Alliance members.
While Dimension Data's platform uses home-grown technology, compared with competitors, the provider has underinvested in engineering resources to build out its IaaS features.
The platform, while capable, lacks value-added capabilities.
Niche Player: Fujitsu
The Japanese IT manufacturer offers its global base of customers a variety of public and private cloud services at the software, platform and infrastructure levels.
That influence across the industry keeps Fujitsu on the Magic Quadrant year after year, though only as a Niche Player.
Fujitsu has a long history in IT services and data centre outsourcing, both in Asia and in Europe. With that comes a large global sales force and "a large existing base of captive customers into which it can sell cloud services."
Fujitsu "has been successful at extending existing Fujitsu relationships into cloud deals. It has very responsive support and good account management".
Fujitsu is nurturing ambitious plans for building out a next-generation OpenStack cloud platform to consolidate all its internal systems. Customers should take that into account when considering the purchase of existing offerings.
While the coming platform might advance its cloud capabilities, currently "Fujitsu's cloud IaaS capabilities lag significantly behind those of the market leaders, and the gap is increasing, not narrowing."
Niche Player: CSC
Two years ago, CSC was the only cloud vendor sharing the Leaders quadrant with AWS in the Magic Quadrant rankings, praised by Gartner for having fully embraced a standardised, automated model for cloud computing.
But last year CSC dropped into the Visionaries quadrant, and this year it slid horizontally, joining other Niche Players.
During a recent earnings call, CEO Mike Lawrie said: "I missed some of the dynamics associated with the acceleration to cloud. It is accelerating and had a bigger impact than what I thought it was going to have in 2015."
CSC is about to undergo major upheaval, recently revealing it would be separating into two distinct companies.
CSC has pivoted toward a broker model that allows its customers to manage multiple clouds, including industry leaders like AWS and Microsoft Azure.
Gartner again noted that CSC offers a "highly standardised, highly automated cloud model, successfully blending the benefits of a true cloud service into an enterprise-ready offering".
CSC's sales strategy often leads customers to choose its management tools, Agility Platform, to manage third-party clouds. The company is effectively driving business to competitors.
"In the past year, CSC's investments in its own platform have focused on integrating it with the Agility Platform, rather than advancing the core capabilities of the offerings."