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Cloud computing market innovation cannibalized by large IT providers

While some public cloud providers such as Amazon Web Services are showing explosive growth, others are seeing their sales plateau or even decline, based upon the Q1 2013 reports. Is this a trend or just a blip in the new but bursty cloud computing market?

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Also, what about new innovations in the cloud computing space? This seems to be slowing down as well. Let's consider both of these issues.

Core to this notion that the cloud computing market is saturating is the deceleration, not the decline, of the market. It's not that there are fewer sales than last quarter; it's that the quarter-to-quarter growth rate is slowing down a bit. However, the growth of public and private cloud computing continues, and the trend, though slowing, still shows steady growth over the next 10 years.

Amazon Web Services (AWS) is typically a good bellwether for the cloud market, and it continues to do well. Indeed, according to a new report by Morgan Stanley, AWS will hit $24 billion in revenue by 2023. Other cloud computing players figure to track with that market growth as well, with much of the funding from cloud computing coming from the cannibalization of traditional hardware and software.

Considering that AWS won't find saturation in the next 10 years, it's doubtful that other cloud providers will as well. That is, as long as their technology solutions remain competitive.

However, while there won't be saturation in the market as a whole for some time, there will be sectors of the cloud computing market that cannot fit everyone. For example, public cloud-based storage seems to be at a point at which new players entering that market, unless they have something very unique and compelling, typically won't find the customers they require to stay alive.

The cloud market's innovation crisis

The larger issue is that innovation in cloud computing, however, seems to be on the decline. This is largely due to the number of innovative and successful cloud computing startups that have been acquired by much larger and less innovative players.

When most of these smaller, more nimble and more innovative companies become part of a larger player, the innovation stops, and the key leaders leave as soon as they can. Thus, the more you hear about cloud startups being taken out, the less innovation you'll see in the future.

Of course, new cloud startups appear in the marketplace each week. However, many of those seem to be just replicating the technology approaches of others that already exist in the market. For example, I often hear of new companies as self-described "Amazon killers," but they lack any creative or compelling technology to back up that claim.

So considering that the more promising companies are selling, and we're not seeing many new ideas appear, there could be an innovation crisis as early as next year. Simply put, we won't be getting enough new ideas to drive the market, and we could see things become more stagnant and less interesting.

There is really not a lot we can do about this trend other than reject less than innovative ideas as consumers of technology. I do. There are still some innovative players left -- but you can't blame the larger players for buying innovation when they lack it. Nor can we blame the startups for taking the big checks. That dance has been going on for the last 100 years.

That said, those who pay for this technology should demand better. Thus, we must promote and support those people and companies who bring new ideas to the cloud computing party. We're going to need them.

About the author:
David "Dave" S. Linthicum is with Cloud Technology Partners and is an internationally recognized cloud industry expert and thought leader. He is the author and co-author of 13 books on computing, including the best-selling Enterprise Application Integration. Linthicum keynotes at many leading technology conferences on cloud computing, SOA, enterprise application integration and enterprise architecture.

His latest book is Cloud Computing and SOA Convergence in Your Enterprise: A Step-by-Step Guide. His industry experienceincludes tenures as chief technology officer and CEO of several successful software companies and upper-level management positions in Fortune 100 companies. In addition, he was an associate professor of computer science for eight years and continues to lecture at major technical colleges and universities, including the University of Virginia, Arizona State University and the University of Wisconsin.

This was first published in June 2013

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