Eric Knipp

A member of the Gartner Blog Network

Eric Knipp
Managing Vice President
3 years at Gartner
15 years IT industry

Eric Knipp is a Managing Vice President in Gartner Research, where he focuses on Web and cloud application development methodologies and trends. Mr. Knipp is based in Dallas, Texas. Read Full Bio

Coverage Areas:

Is Shakeout in the Cloud Application Platform Industry About to Begin?

by Eric Knipp  |  August 24, 2009  |  4 Comments

Industry Shakeout 101

According to my strategy professor, Gordon Walker, “the trigger point [for shakeout to begin] is when one or more firms achieve a level of productivity that neither weaker rivals nor potential entrants can match. Thus, the shift in entry and exit rates is ultimately caused by successful and sustainable growth strategies. Only the presence of one or more firms whose dynamic capabilities create dominant, defendable market positions can deter entrants and force weak competitors to leave the industry.” (page 137)

Shake it on, Baby

Now, I can tell you, that to be sure, there is no shortage of entrants into the cloud application platform industry. Force.com may have started things off a few years ago, but today there are at least 40 companies, and probably more than that, who play in the space. An upcoming Gartner report profiles many of these companies. I don’t think we’re in the shakeout period yet; however, I put better-than-even money on the idea that we’re in the last stages of expansion before a shakeout gets started. I submit as evidence the following:

1. CogHead, a leading (but small) technology company in the Cloud application platforms space, went bust last December. Its assets were ingested by the large, enterprise-flavored SAP. I am not sure what SAP plans to do with those assets, but I don’t believe they bought CogHead’s stuff to put it in a museum.

2. Microsoft Azure (and .NET Services), which is kind of a hybrid approach somewhere between Amazon EC2 (cloud system infrastructure) and Google App Engine (APaaS), will hit general availability sometime soon. This will mark the first big-time enterprise software player to have their own Cloud application platform offering.

3. VMWare has jumped into the fray with its planned acquisition of SpringSource – whose CloudFoundry offering constitutes a Cloud application platform has to be the main reason the company shelled out over 400 million, for what is a tiny open-source company (admittedly, Spring, around which the core business of SpringSource is built, is a great and widely-adopted framework for Java programmers). It will be interesting to see how VMWare plans to incorporate the SpringSource and Hyperic assets into its portfolio, and what (if any) other complementary acquisitions they will make. I’m not sure what to expect, but if I were a small Cloud application platform startup counting on a neutral VMWare container within which to run my “shared-hardware” multi-tenant platform, I’d be a little bit more worried than I was a few weeks ago.

Twist and Shout

The future for APaaS and other types of Cloud application platforms looks very bright to me. I’m particularly bullish on APaaS because of the productivity benefits available to developers using a combination of development of new code and composition of business-oriented services and components offered by the provider. I don’t think there’s a big enough market for all of the companies producing Cloud application platform software to wind up as “winners”, though. I also think that the time is drawing close where the other “mega-vendors” – IBM, Oracle, and SAP – must either launch their own Cloud application platforms or acquire one, or risk being left behind. Keep your eyes open for acceleration in the demise of Cloud application platform companies, and deceleration among new entrants.

4 Comments »

Category: Uncategorized     Tags:

4 responses so far ↓

  • 1 Jake Burns   August 25, 2009 at 4:34 pm

    I think you’re dead on right. There is a coming shakedown in the cloud. Those who are undercapitalized or have less functionality will likely be the first victims. http://www.workxpress.com

  • 2 Yoram Heller   September 9, 2009 at 11:37 pm

    just came across your blog. was curious to see what you thought about mor.ph and the idea of the enterprise cloud ie a blade server dedicated to the enterprise behind a firewall.

  • 3 Eric Knipp   September 10, 2009 at 2:40 pm

    @Yoram – I haven’t been briefed by the folks at Morph but upon first glance it looks like an APaaS. There is much differentiation from one APaaS to the next so I can’t make any well-informed comments. Reviewing what is on their Web site leads me to believe that the design of the platform is similar to many other APaaS offerings.

    Gartner would call “blade server dedicated to the enterprise behind a firewall” NOT CLOUD. However, a private cloud could be created out of a cluster of such servers provided that internally resources are provisioned to different tenants elastically and metered by use – for example, a large enterprise might offer centrally-managed private cloud services to multiple business units. Each business unit would be billed only for what they use, which would vary depending on the elastically provisioned resources. In practice I believe this is hard to achieve, but many vendors are trying to go there.

  • 4 Little Fluffy Clouds   September 16, 2009 at 1:38 pm

    [...] of platform enabling development of Web applications using a Cloud Computing model. A few weeks ago I blogged that the Cloud Application Platform market might be on the verge of shakeout; whether I was right or not, we should all agree that the market is young compared to the [...]