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The Big Cloud Winners Are…Not Just the Hyperscale Players

cloudibee by cloudibee
May 27, 2022
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It may come as a surprise, but the big winners in the infrastructure-as-a-service space aren’t just the hyperscale players. Those providers – including AWS, Microsoft, and Google – do receive a lot of media attention, and help set the pace for the industry with features and capabilities that others imitate. However, they also create unreasonable expectations among customers, industry observers, and other service providers for what it means to be successful.

The truth is, hyperscale IaaS providers are hardly the only cloud winners. Cloud computing isn’t a race to the top of the market-share heap, and success with public cloud services isn’t just a game of scale. While AWS, Google, and Microsoft may lead in the hyperscale segment, the cloud computing market is large, complex and full of opportunities for others too. There are a variety of niche markets being served, including customers with specific requirements not met by hyperscale players, such as unique hardware, better performance and lower prices. There are also regional service providers offering lower latency and higher levels of service to local customers.

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Capturing new customers is important for service providers, but there are many measures of success that don’t relate to gross market share. We should all focus more keenly on financial measures, including revenue growth, profit growth, and the ability to maintain healthy margins. We should also consider additional measures, such as the delivery of unique and innovative services, the ability to serve new markets, and the ability to meet evolving customer demand with new services. With respect to these criteria, there are many cases of service provider success.

Here are some examples:

Internap

Internap started as a network service provider in 1996 before entering the colocation space in 2000, followed by the cloud services market in 2011. In 2013, its annual data center services segment profit had increased by 21% from the previous year with a profit margin of 50%. During its lifetime, Internap has partnered with several successful players in the cloud industry. In November 2013, they acquired iWeb Group Inc. – a cloud service and hosting provider – and stated that $11.4 million worth of revenue in Q1 2014 (out of $82 million total) came as a direct result of the acquisition. Internap continues to expand its global reach by adding data centers across North America, Europe and Asia, and has received numerous awards for excellence and data center efficiency.

Joyent

Joyent is a cloud VPS service provider that positioned itself early as a competitive alternative to AWS. Because it is a privately held company, financial information is not available, but there are several indications that Joyent is achieving success. The company has expanded its services on a global scale, adding cloud services in both Asia and Europe in 2012. Joyent has also received multiple industry awards for its technology and services, and continues to add new revenue streams, including its Manta Storage Service in June 2013. Like Internap, Joyent has formed important partnerships with other successful players in the industry, including Riverbed in September 2013. While it hasn’t achieved hyperscale status, Joyent has grown substantially and garnered significant visibility and recognition with its cloud services.

Rackspace

Rackspace is a testament to how service provider success can be widely misunderstood and often misrepresented. The company was originally seen as a potential competitor in the hyperscale space after achieving significant early growth with its cloud services. But as the gap in total revenue between Rackspace and the hyperscale players widened over the years, industry spectators started to paint a bleak picture. Many have perceived the widening gap as a sign of failure. In reality, Rackspace has been quite successful. In Q2 2013, the company reported that revenue from public cloud services had grown 36% year-over-year. While they might not have lived up to inflated industry expectations, this is an indication that Rackspace has been, and continues to be successful.

The important thing for us to remember is that success is not just measured by total market share. This is an unrealistic objective, and tends to result in unachievable end goals. Instead, success should be gauged using broader measures, such as financial growth in terms of revenue, profit and margins. They should also include more diverse measures, such as innovation and differentiation, partnerships with other successful industry players, and the ability to meet new and growing customer demands. Finally, assessments of success should also draw a comparison between where individual service providers started and where they are now, rather than comparing their size with hyperscale players.

Keep in mind that even the hyperscale players are not all achieving the same level of market share. AWS market share trumps both Microsoft and Google. That shouldn’t mean that Microsoft and Google have been unsuccessful.

There are many measures of service provider success, and thus many providers who are clearly winning in today’s market. We all need to keep these broader measures of success in mind and avoid simply comparing market share with the “big three.”

Tags: AWSCloudEnteprise CloudEnterprise
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