We now have three major cloud leaders: Amazon Web Services, Google, and Microsoft. As the cloud market continues to mature, I predict that the runners-up will have an increasingly hard time keeping pace. Even if they are more innovative and creative, some aspects of being a cloud leader come down to the money you can spend -- and market leaders have more to spend.
Let's take IaaS. I'm starting to categorize it by tiers. The first tier includes multi-billion-dollar companies like AWS, Google, and Microsoft, which command most of the market. (AWS has a huge lead, even within this tier.)
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The second tier includes IBM (its SoftLayer unit), Verizon, Hewlett-Packard, Oracle, Cisco Systems, CenturyLink, and a few others. These are all big companies, for sure, but they cannot spend the money to buy a bigger footprint or go faster with their cloud services.
Finally, the third tier is everyone else. This includes the many storage-as-a-service companies, integration-on-demand, security-as-a-service, you name it. There are hundreds of these guys. Some of them have great tech, but most earn much less than $100 million in annual revenue. They definitely can't spend their way to broad market leadership, but they have a huge advantage I'll get to shortly.
The Tier 1 providers are Tier 1 providers because they can do something Tier 2 can't: Spend billions to build out infrastructure to support their cloud services. This includes buying points of presence all over the world, which appears to be very important to public cloud consumers. Moreover, they have hoarded the cloud talent, which means they have the brains in-house to further innovate for market growth. Such talent acquisition takes a huge amount of cash, which most of the other providers don't have or aren't willing to invest.
Tier 2 faces the most business risk. We've already seen IaaS providers, such as Rackspace, give up trying to keep up with the likes of AWS. In Rackspace's case, it has moved back into hosted and managed services instead. Some of the other Tier 2 providers are likely to fall by the wayside in the next year or so. They will shift their focus to a niche, or they will fade into the background, hoping that nobody will notice.
But the Tier 3 providers will be fine. They're not battling it out with the rich Tier 1 providers. Instead, if they have good technology, the complement the Tier 1 providers and will see their success grow along with the Tier 1 vendors.
Like life, the cloud marketplace is unfair. The golden rule prevails: He with the most gold wins. If you don't have the gold, service someone who does.
This article, "Dark skies hang over midtier cloud providers," originally appeared at InfoWorld.com. Read more of David Linthicum's Cloud Computing blog and track the latest developments in cloud computing at InfoWorld.com. For the latest business technology news, follow InfoWorld.com on Twitter.