The Gartner Magic Quadrant is, perhaps, the most renowned artifact in the technology analyst industry. It is controversial, to be sure, with many criticizing it as superficial, too high-level and even reflective more of vendor business relationships with Gartner than true technical and market superiority.
I'm not necessarily convinced of those negative aspects of the Magic Quadrant. Issues notwithstanding, it's obvious from everyone's behavior that being in or out of the MQ is extremely important to vendors. They track who's in (and out), trumpet inclusion when it occurs and assess their strategy and technology plans in light of potential MQ inclusion. Certainly, vendors who achieve the coveted Magic Quadrant inclusion—even if privately they denigrate its importance—shout about it from the rooftops.
The Gartner Magic Quadrant As a Filtering Heuristic
Once you understand how IT shops use the MQ, it's easy to understand why vendors are so eager to be included. It's not just bragging rights, that's for sure. IT organizations beginning to evaluate technology that's new to them often find understanding it confusing. Just trying to establish a conceptual model of an emerging technology sector can be difficult. For example, if you had just heard about software-defined networking, how would you go about understanding it well enough to decide what you should do about it?
IT organizations commonly rely on technology analyst firms to help them comprehend the overall outline of a technology sector. Once they have a grasp on a new sector, they once again turn to the firms to help them evaluate the vendors in the sector.
Here's where the power of the Magic Quadrant comes to the fore. IT organizations use the MQ as a filtering mechanism; by definition, inclusion in the MQ bestows an imprimatur of technology leadership. Moreover, occupying a place in the MQ virtually assures a vendor of being placed on an IT organization's evaluation shortlist and getting a serious look. This is incredibly valuable, as most vendors know how challenging it can be to gain a fair evaluation if the IT organization sees the vendor as an also-ran.
The Cloud Computing Magic Quadrant: 2011 vs. 2012
With the foregoing as background, it's fascinating to look at the cloud computing Magic Quadrants for 2011 and 2012. The thing that immediately stands out is the different position Amazon Web Services occupies in the two years.
In 2011, AWS is rated quite highly for "completeness of vision" but is bunched with several other providers for "ability to execute." In 2012, by contrast, AWS stands alone, having put significant white space between itself and its competition. Non-AWS cloud providers are huddled down in the least-desirable lower-left corner—in the MQ, but barely. AWS sits alone, near the most-desirable upper-right corner. The white space between it and its fellow MQ members is striking.
One can speculate as to why Gartner chose to put AWS so far ahead of its fellow cloud providers:
- AWS has extended old and developed new services that deliver enterprise functionality. For example, it has provided better identity management and access controls via its IAM service. Likewise, it has rolled out more managed services—Amazon Relational Database Service, Elastic MapReduce and the like—which make it easier for enterprises to adopt AWS.
- AWS has staffed up in sales and services, hiring seasoned enterprise sales reps and experienced system architects—both of whom work with large enterprises (Gartner's natural customer base) to help them achieve greater success and satisfaction with AWS.
- Amazon is putting a lot of effort into publicizing its enterprise success stories, and the availability of that information convinced Gartner that AWS is truly an MQ leader .
- (Perhaps) Amazon has spent more time with Gartner directly communicating its value proposition, enterprise takeup and enterprise-oriented offerings, and Gartner has integrated that information into its evaluation for the MQ.
No matter the reason, AWS now occupies a coveted spot in the MQ, thereby ensuring it will be looked at by enterprises deciding what to do about cloud computing. This is bound to disappoint many cloud service providers hoping that prospects will dismiss AWS as not enterprise-ready. Moreover, the MQ will be used within enterprises by those groups that have embraced AWS (this phenomenon is often referred to by IT organizations as "rogue" or "shadow IT") as endorsing their choice.
The complete list of 2012 cloud Magic Quadrant companies includes Dimension Data, CSC, Savvis, Terremark and Amazon Web Services.
Cloud Computing Magic Quadrant Implications: Market Shakeout
Membership in the MQ is a gift that keeps on giving. Companies on the forthcoming 2013 cloud MQ list are going to be front-runners for enterprise opportunities and will undoubtedly grow significantly. If one believes (as I do) that the CSP business reflects significant economies of scale and growth enables spreading fixed costs across larger amounts of variable revenue, this implies that MQ occupants will probably financially outperform non-MQ CSPs. Over time, this financial edge will lead to a strong distinction between market leaders and everyone else, much like the strongest riders in a bicycle race separate themselves from the peloton.
For the non-MQ CSPs, failure to join the breakaway group means that they have to find a way to be successful with more limited upside. This will force them to move away from me-too offerings and find some basis of differentiation that lets them succeed with a focused offering.
There are two differentiation avenues open to these CSPs: technology and business segmentation. Regarding the former, it might be possible for these CSPs to, say, focus on certain kinds of storage or, perhaps, high-performance computing. In my view, this is probably not likely to be a successful strategy in the long-term; it requires significant technology skills and funding, both of which are more available to the MQ occupants.
This leaves business segmentation as the most likely vehicle for the second-tier CSPs. In other words, focus on certain vertical industries. For example, a Houston-based CSP could build a strong oil and gas knowledge base, with employees well versed in the technologies of this industry and familiar with the legal and regulatory compliance issues present for companies in the industry, not to mention a sales force that can be targeted toward oil and gas companies with specialized selling tools.
This year will mark the beginning of a CSP shakeout. The ultimate outcome: Consolidation by the market leaders and vertical focus by those second-tier CSPs that don't want to sell out. We've been in a funny, frothy time to this point, with everyone and his brother madly building cloud offerings in a party atmosphere of giddy, late-night frenzy. Now, in the cold light of day, with many nursing hangovers and bleakly surveying their prospects, we'll see the beginnings of a looming shakeout. The Gartner cloud computing Magic Quadrant won't cause this to occur, but it will reinforce the trend.
Bernard Golden is the vice president of Enterprise Solutions for enStratus Networks, a cloud management software company. He is the author of three books on virtualization and cloud computing, including Virtualization for Dummies. Follow Bernard Golden on Twitter @bernardgolden.