Gartner Blog Network

Does cloud infrastructure become commoditized?

by Lydia Leong  |  February 17, 2009  |  1 Comment

My colleague Daryl Plummer has mused upon the future of cloud in a blog post titled “Cloud Infrastructure: The Next Fat Dumb and Happy Pipe?” In it, he posits that cloud infrastructure will commoditize, that in 5-7 years the market will only support a handful of huge players, and that value-adds are necessary in order to stay in the game.

I both agree and disagree with him. I believe that cloud infrastructure will not be purely a commodity market, specifically because everyone in this market will offer value-added differentiation, and that even a decade out, we’ll still have lots of vendors, many of them small, in this game. Here’s a quick take on a couple of reasons why:

There are diminishing returns on the cost-efficiency of scale. There is a limit to how cheap a compute cycle can get. The bigger you are, the less you’ll pay for hardware, but in the end, even semiconductor companies have to make a little margin. And the bigger you are, the more you can leverage your engineers, especially your software tools guys — but it’s also possible that a tools vendor will deliver similar cost efficiencies to the smaller players (think about the role of Virtuozzo and cPanel in shared hosting). Broadly, smaller players pay more for things and may not leverage their resources as thoroughly, but they also have less overhead. It’s important to reach sufficient scale, but it’s not necessarily beneficial to be as large as possible.

This is a service. People matter. It’s hard to really commoditize a service, because people are a big wildcard. Buyers will care about customer service. Computing infrastructure is too mission-critical not to. The nuances of account management and customer support will differentiate companies, and smaller, more agile, more service-focused companies will compete successfully with giants.

The infrastructure itself is not the whole of the service. While there will be people out there who just buy server instances with a credit card, they are generally, either implicitly or explicitly, buying a constellation of stuff around that. At the most basic level, that’s customer support, and the management portal and tools, service level agreements, and actual operational quality — all things which can be meaningfully differentiated. And you can obviously go well beyond that point. (Daryl mentions OpSource competing with Amazon/IBM/Microsoft for the same cloud infrastructure dollar — but it doesn’t, really, because those monoliths are not going to learn the specifics of your SaaS app, right down to providing end-user help-desk support, like OpSource does. Cloud infrastructure is a means to an end, not an end unto itself.)

It takes time for technology to mature. Five years from now, we’ll still have stark differences in the way that cloud infrastructure services are implemented, and those differences will manifest themselves in customer-visible ways. And the application platforms will take even longer to mature (and by their nature, promote differentiation and vendor lock-in).

By the way, my latest research note, “Save Money Now With Hosted and ‘Cloud’ Infrastructure” (Gartner clients only) is a tutorial for IT managers, focused on how to choose the right type of cloud service for the application that you want to deploy. All clouds are not created equal, especially now.

Category: infrastructure  

Tags: cloud  hosting  

Lydia Leong
VP Distinguished Analyst
16 years at Gartner
23 years IT industry

Lydia Leong covers cloud computing and infrastructure strategies, along with a broad range of topics related to the transformation of IT organizations, data centers, and technology providers.Read Full Bio

Thoughts on Does cloud infrastructure become commoditized?

  1. […] “Cloud Infrastructure: The Next Fat Dumb and Happy Pipe?” Her post, titled “Does cloud infrastructure become commoditized?“, rightly points out that added value has a life of its own that will tend to allow […]

Comments are closed

Comments or opinions expressed on this blog are those of the individual contributors only, and do not necessarily represent the views of Gartner, Inc. or its management. Readers may copy and redistribute blog postings on other blogs, or otherwise for private, non-commercial or journalistic purposes, with attribution to Gartner. This content may not be used for any other purposes in any other formats or media. The content on this blog is provided on an "as-is" basis. Gartner shall not be liable for any damages whatsoever arising out of the content or use of this blog.