GigaOm | October 23, 2015

How hybrid will reshape the entire cloud market

Sinclair Schuller is the CEO and cofounder of Apprenda, a leader in enterprise Platform as a Service.

When the phrase “hybrid cloud” is mentioned, some technologists will tell you it is the eventual end state of cloud computing, while other technologists chuckle. Those that chuckle typically view hybrid as a phrase used by vendors and customers who have no cloud strategy at all. But hybrid is real and here to stay. Not only is it here to stay, but the hybrid cloud will also reshape cloud computing forever.

People today imagine public cloud to be an “amorphous, infinitely scalable computing ether.” They think moving to the cloud rids themselves of the need to detail with computing specificity and that cloud makes you location, risk and model independent. They think enterprises that move to the cloud no longer need to depend on pesky IT departments and deal with risks associated with centralized computing. This perception of computing independence and scale couldn’t be further from the truth.

The promise of cloud is one where anyone who needs compute and storage can get it in an available, as-needed, and robust manner. Cloud computing providers have perfected availability to the point where, even with occasional mass outages, they outperform the service-level agreements (SLAs) of internal IT departments. This does come at a cost, however.

Cloud computing is arguably the largest centralization of technology the world has ever seen and will see. For whatever reason, many people don’t immediately realize that the cloud is centralized, something that should be heavily scrutinized. Possibly because the marketing behind cloud can be vague and lacking a description of a tangible “place.” Don’t be fooled.

When an enterprise selects a cloud vendor, they’re committing to that provider in a meaningful way. As applications are built for or migrated to a cloud, switching cost gets very high. The nature of this market is driven by a network effect where, assuming all else is equal, each prospective customer of a cloud provider (AWS, Microsoft, etc.) benefits by consuming a cloud that has many of customers over one that has fewer since it indicates lower risk and helps drive the economies that make a given cloud attractive.

If we play this future out, we’ll likely see the cloud infrastructure market collapse to just a few massive, global providers. This will partly be driven by success of the individual providers and the consolidation of smaller players who have great technology but simply can’t compete at that scale. Just take a look at the acquisition of Virtustream by EMC just prior to Dell’s acquisition of EMC for a recent example.
A look at recent market share estimates show exactly that, with Amazon, Microsoft, IBM, and Google accounting for 50 percent of the global cloud infrastructure market. One day, these five vendors will likely account for 80 percent of the market. Compare that to the often-criticized banking world, where despite the massive size of today’s banks, the list of banks that hold 50 percent of global deposits is much longer than just five banks. If we applied the same standard to cloud computing, we’d certainly be infuriated and demanding that these “too big to fail” computing providers be broken up.

To be clear, I’m not suggesting that what’s happening is bad or that public cloud is bad, but rather to point out the realistic state of cloud computing and the risk created by centralizing control to just a few providers. Cloud would likely never have succeeded without a few key companies making massive bets. The idea of a truly decentralized, global cloud would likely have been the wrong starting point.

Let’s explore the idea that a global decentralized cloud, or something more decentralized than what we have now, is the likely end state. Breaking up cloud providers isn’t necessary or optimal. Unlike banking, technology is capable of layers of abstraction to mitigate these sorts of centralized risks.

Most large enterprises looking to adopt cloud are making two large considerations in their decision process:

  1. They can’t shut down their entire IT department and replace it with cloud. There are many practical reasons why this is unlikely.
  2. Many are keenly aware of the risks associated with depending on a single vendor for all their cloud computing needs.

The first consideration makes it difficult to adopt a public cloud without at least considering how to reconcile the differences with on-premises, and the second makes it difficult to choose one provider at a level that is incompatible with another provider. The result of centralization in public cloud providers and looking for symmetry between off- and on-premises computing strategies is driving enterprises to explore (and in some cases demand) hybrid capabilities in layers that abstract away infrastructure. In fact, hybrid has transformed to be synonymous with multi-cloud.

Technical layers like enterprise PaaS software platforms and Cloud Management Platforms have evolved to allow for multi-cloud capabilities to cater to a modality where resources are abstract. Over the coming years, we’ll likely see multi-cloud features in these technology layers to lead to a much more decentralized computing model where something like a PaaS layer will fuse resources from public clouds, on-premises infrastructure, and regional infrastructure providers into logical clouds.

At least in the enterprise space, “private clouds” will really be an amalgam of resources and will behave as the single, “amorphous ether” that we tend to assign cloud to begin with. The cloud market will not be one where five vendors control all the compute and customers are at the mercy of the vendors. Instead, cloud will be consumed through multi-cloud layers that will protect customers from inherent centralization risk. The end state is a decentralized model with control points owned by the customer through software – a drastic reshaping to say the least.