Is The Iaas Market Too Crowded For New Providers? We Are Just At The Beginning Says Lunacloud Ceo

The implicit judgment in this question was that the existing

, established players have the market already sewn-up; that IaaS was essentially a commoditised item with the enormous economies of scale produced by the largest providers blocking any hope for a new kid on the block.

Beyond my immediate answer that start-ups were already proving themselves on price in the market, there are a number of pointers that suggest that the analyst I was speaking with was wrong in their assessment of the IaaS market.

Firstly, while it is true to say that cloud adoption has reached a tipping point with 61 percent of UK companies using cloud in some way (according to the Cloud Industry Forum), its popularity masks a deeper truth. It is rare to find a company that has committed itself entirely, or even with a significant part of its IT function, to the cloud. The most business critical services and most important data remain, for the most part, in-house.

Furthermore, a recent IDC report published alongside the publication of the new European Union Cloud Strategy, said that only 1.6 percent of available IT spend was used on cloud by organisations participating in their research between the dates of its study "" October 2011 and July 2012.

The immediate take-away from this is that cloud is a widely accepted IT delivery model but a model with little actual penetration "" yet. The widely reported reasons for this is that the services on offer do not fully meet customer needs or overcome their concerns with data security, privacy or sovereignty.

This trust issue has been underscored by the recently published European Cloud Strategy, which has two main areas of focus. Firstly, it is seeking to create common standards and interoperability in the cloud market.

Data portability and interoperability is vital for a competitive cloud market so that customers can easily combine different cloud services or take their business elsewhere if they do not get the level of service that they demand.

The second priority for the strategy was the development of adequate terms and conditions and service level agreements that are flexible to the needs of end-users. Cloud computing is a new phenomenon and in many ways SLAs and contracts have not caught up.

The established players have clearly not got their offer quite right. Many offer non-negotiable agreements to their customers and are not responding to their customers" desire to avoid vendor lock-in.

The European Cloud Strategy points clearly to a cloud future that tackles these issues effectively. New cloud providers coming on the scene are getting ahead of the curve by meeting these market needs now before any form of regulation and standardisation comes into operation.

Secondly, the current low spend on cloud is not expected to last. Gartner, amongst others, predict spending on cloud to grow exponentially over the next few years. There is enormous potential from this level of growth and I would challenge whether large providers are going to be able to keep up.

One reason is that cloud customers have shown a strong preference for providers within their own country or region, mostly for common language and data control issues, as well as network performance.

A lot of the growth predicted by Gartner will come following countries improving their broadband Internet network. As each country becomes a viable cloud market, there is every chance that a local market leader will take hold, challenging international rivals.

There are large parts of the globe where large IaaS providers currently have no nodes established. New start-ups are now snapping these locations up and presenting themselves as the local alternative to the global players.

Local geography and support should not be underestimated in the cloud market. A further challenge for the big players is going to be keeping up with technological improvements. In the early days IaaS providers were competing against more traditional in-house models. Compared in this way, cloud offers unparalleled flexibility and scalability.

However, these days IaaS providers are competing less against traditional in-house models but rather with each other "" and there is a ferocious battle underway to provide the most flexible and the most scalable cloud service possible.

The larger the company the harder it is to be agile and fast in product development. This is true for cloud providers as it is for any other form of IT provider. For example, some new entrants to the market are now offering multi-virtualised technologies allowing for a higher degree of flexibility and performance, including the ability for end-users to change their RAM and DISK resources without the need to reboot or redeploy cloud servers.

Something that Amazon and Rackspace currently do not do. These and other improvements are only going to occur more rapidly in future. The adoption curve for cloud-based services is still in its infancy, no matter the amount of hype in the media.

There is plenty of scope for innovation, there are plenty of untapped new markets in different parts of the world, and there are still improvements that the cloud industry needs to make in terms of standardisation, service level agreements and contracts. All of which points to a highly volatile market that is ripe for new start-ups to enter.

More info at http://www.lunacloud.com

by: Anita Blake

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