10 Cloud Computing Predictions for 2014

Cloud computing is increasingly becoming the rule and not the exception for application deployment. This will make 2014 an interesting and disruptive year for vendors, service providers and IT organizations grappling with this change.

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As AWS crosses the $4 billion revenue mark, it doesn't seem to be decelerating its innovation progress. Far from it. At its recent re:invent 2013 conference, AWS announced five major new offerings and pointed out that it would deliver more than 250 new offerings or service improvements in 2013.

Nothing indicates that 2014 will be any different; expect many new AWS services and service offerings. In a recent set of posts on AWS hardware and software infrastructure, I note that, during its first years, AWS created a global, highly scaled infrastructure that reliably delivers foundation capabilities in computing, storage and networking.

Today, AWS can leverage those building blocks to create higher-level functionality targeted at emerging needs of its customers. For example, the just-announced AWS Kinesis event processing service uses EC2, Elastic Load Balancer, DynamoDB, and IAM as ingredients, along with Kinesis service-specific code, combined as part of a new recipe.

Amazon achieves its innovation because it approaches cloud computing as a software discipline, not an extension of hosting, as most of its competitors do. Next year will see further evidence that the software approach delivers customer value much more quickly than the hardware approach.

7. Google, Microsoft Will Get Serious About the Cloud

In a way, AWS has had a free ride to this point. Most of its competition has come from the hosting world, and, as noted, is unable to take a software approach to the domain. The inevitable result: AWS has improved, and grown, much more rapidly than other CSPs.

That unopposed free run will end in 2014. Both Google and Microsoft have AWS in their crosshairs and are rolling out serious competitive offerings, designed for an all-out battle royale. Both have, finally, recognized that their initial cloud offerings were inadequate. (Both, in my mind, seemed like offerings that customers should find superior to AWS, and both companies appeared baffled that the advantages of the offerings, though clear to them, went unappreciated by potential customers.) With Version 2.0, both companies deliver directly competitive cloud offerings.

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Microsoft Windows and the Cloud

Microsoft has an obvious opportunity here. It has an enormous installed base and a huge developer community. Its offering integrates directly with existing development tools and makes it easy to host an application in Azure. Its greatest challenge may not be in technology, but in redirecting the inertia of its existing business and partner base. I've heard rumblings about touchy Microsoft resellers wondering what their role in the Microsoft future will be. The inevitable temptation for the company will be to water down its Azure initiative to placate existing partners. That would be crippling, but it's understandable why the dynamics of existing relationships might prevent (or hamper) Microsoft's Azure progress. Nevertheless, Microsoft has plainly come to understand that AWS represents a mortal threat and has wheeled to go up against it.

Google is in a different position. It has no installed base threatened by AWS. Nevertheless, it has decided to come right after Amazon, using its deep pockets and outstanding technical resources as weapons. This very interesting post, describing numerous advantages Google Compute Engine has vis-à-vis AWS, makes it clear that Google is directly aiming at technical shortcomings in the AWS offerings. In a way, this is a refreshing change from the feeble attempts of other erstwhile competitors, who insisted on trumpeting "advantages" over AWS that nobody really cares about.

The Google offering is, perhaps, the more intriguing of the two. Over the past decade, Google has been far more innovative than Microsoft; that alone implies that it might be the most creative opponent AWS faces over the next year.

In any case, for AWS the CSP market will no longer be like shooting fish in a barrel, and 2014 will present the beginning of a multi-year tussle for dominance among these three.

8. The Importance of Ecosystem Will Become Clear

Nearly everyone has heard of the "network effect," which refers to the added value to a group of users when one more user joins. It's sometimes summed up as, "If there's just one fax machine, it's pretty much useless;" unless many people have fax machines you can send faxes to or receive faxes from, owning a fax machine doesn't provided much value. (It's a funny turn of events that we're pretty much back to the early state of affairs with fax machines — hardly anyone has one and, yes, the remaining ones aren't worth much).

With respect to technology platforms, there's a symbiotic relationship between the network effect of the number of users and the richness of the platform functionality. This often isn't based on — or not solely on — the capability of the platform itself but rather, the complementary third-party services or products. More users makes a platform more attractive for third-party offerings, which makes the platform more attractive for users deciding which platform to adopt.

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Today, the richness of the CSP ecosystems is completely lopsided. Not only does AWS provide a far richer services platform than its competitors, it has by far the larger number of complementary services provided by third parties. In 2014, as more applications get deployed to public cloud providers, the importance of the ecosystem will come into focus.

The richness of a platform's ecosystem directly affects how quickly applications can be created and delivered. Cloud platforms that have a paltry ecosystem are fated to suffer, even if their foundation services, such as virtual machines and network capability, are better than Amazon's.

Clearly, Microsoft should be able to roll out a rich ecosystem, since a key to Windows' success is its ecosystem; much of it, presumably, should port to Azure fairly easily. We'll see how Google progresses on this next year. By the end of next year, the discussion will on from who has the best VMs to who best enables applications, with a recognition that the richness of a platform's ecosystem is crucial.

9. VMware Will Realizes vCHS Is Critical to Its Future

VMware and Cloud Computing

VMware has been in a funny position with respect to cloud computing. Its undoubted platform advantages inside the corporate data center haven't been matched by a concomitant public cloud success. For whatever reason — or, perhaps, for a number of reasons — VMware's public CSP partners haven't been able to generate large adoption for the VMware flavor of cloud computing.

VMware is now taking another run at this, with an approach explicitly designed to extend and integrate on-premises environments into a VMware-directed hybrid cloud offering. Certainly, this approach holds a lot of promise. The capability to seamlessly transfer a workload from internal to external environments could solve a lot of headaches for IT organizations.

This approach, dubbed vCHS, can provide benefits beyond simple technology consistency, in that it would enable IT organizations to focus on one set of personnel skills, thereby reducing costs and complexity.

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Next year will be important for VMware and its vCHS offering. As noted above, companies are making decisions right now that will set their course for the future. If VMware hopes to play as important a role in public cloud computing as it does in internal data center environments, it needs to be part of those decisions. There's not a lot of time left to gain a spot on short lists. You can be sure that VMware recognizes how important 2014 will be to its future and that it's planning an aggressive campaign to maintain its market-leading position.

10. A Pricing Bloodbath Is Coming to the Public Cloud

Amazon has had a clear field to this point. Most of its competition has, in effect, competed on the wrong front, or at least chosen to try and differentiate on offering aspects about which most adopters are apathetic. One key difference between AWS and most of its competition is cost. While much of Amazon's competition has aligned its pricing with existing hosting models, requiring significant commitments in terms of both amount of resource and duration of contract, Amazon makes it easy to get started for a few dollars, with no commitment at all.

In effect, this has meant that Amazon is competing with itself — and, to its credit, it has reduced prices since it first launched AWS. That field of one is going to expand this year with the arrival of Microsoft and Google. The result will be a ferocious price war, with all three companies repeatedly dropping costs to maintain (Amazon) or attain (Microsoft and Google) market share. Not only is this a battle for market dominance, it reflects the nature of cloud computing: A capital-intensive industry in which maintaining high utilization is critical.

For other cloud providers, witnessing this competitive melee won't just be a jolly spectator sport. Every cloud provider is going to be confronted — on a daily and ongoing basis — with three deep-pocketed competitors one-upping each other every time they drop their prices. Inevitably, other CSPs will suffer collateral damage as potential customers bring the list prices of the big three into contract negotiations and expect them to match what they are offering. For those without low cost of capital and their own deep pockets, next year will be the beginning of a long, slow descent into a financial morass, solved only by industry consolidation or shuttering their offerings.

The airline industry is instructive in this regard. As with cloud computing, airlines are a capital-intensive business; airplanes cost a lot, while seats are sold on a low-cost, low-commitment basis. The key to the airline industry is yield management, which is its version of infrastructure utilization. The past few years have witnessed multiple airline bankruptcies and merger-mania. Next year the cloud computing market will look a lot like the airline industry — great for customers, but perilous for providers.

Well, there you have it — my 2014 cloud computing predictions. In a sense, what has happened in the industry to this point has been the prologue for the main cloud computing story. Next year represents the beginning of the main story. In 2014, we'll see cloud computing become the dominant platform for IT from now on. There will be many successes as users learn to take advantage of the new capabilities cloud computing offers, along with challenges to many in the industry — both users and vendors — who struggle to make a successful transition to the platform of the future.

Bernard Golden is senior director of Cloud Computing Enterprise Solutions group at Dell. Prior to that, he was vice president of Enterprise Solutions for Enstratius Networks, a cloud management software company, which Dell acquired in May 2013. He is the author of three books on virtualization and cloud computing, including Virtualization for Dummies. Follow Bernard Golden on Twitter @bernardgolden.

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Copyright © 2013 IDG Communications, Inc.

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