A tale of two cloud markets

Posted by Mike Vizard on Nov 5, 2014 8:46:52 AM

Many cloud service providers are convinced that when it comes to the pricing of cloud computing services, it’s a race to the bottom. But a new survey of 550 IT professionals conducted by Peer 1 Hosting, a provider of hosted IT services, suggests that at least half of the customers surveyed are wary of cloud hosting services that are priced too low.

Under the heading of "you get what you pay for," half of the respondents said they would not switch hosting providers for a less expensive option. Over 50 percent said they would eschew a price cut if it meant a reduction in the quality of the service being provided. In fact, both security and customer services ranked highest in terms of what IT professionals are looking for from their hosting providers.

canstockphoto12993185Unfortunately, over 60 percent of IT professionals also revealed they don’t have access to a dedicated hosting account manager to help them manage their requirements on a day-to-day basis. In addition, nearly a quarter had no on-premise support from their hosting provider, with a further third receiving no live support during the provisioning process.

From the perspective of IT service providers, the most interesting thing about that is the majority of IT professionals surveyed were willing to pay extra to receive both 24/7 telephone support and live support during the provisioning process. They also indicated they would pay extra for dedicated account managers and on-premise support.

Of course, while half the market is clearly looking for more hand-holding in the cloud, other research suggests that the other half of the market is fairly price sensitive. Amazon, for example, just revealed that Amazon Web Services (AWS) saw a 15 percent increase in revenue quarter after quarter, which was also a 40 percent year over year increase. As a result, Synergy Research Group estimates Amazon's combined cloud infrastructure (IaaS) and app platform (PaaS) revenue share of the total market was 27 percent in the third quarter, which Synergy Research Group says is more than twice the size of any other cloud rival.

Meanwhile, Microsoft, which has become a lot more aggressive under the leadership of CEO Satya Nadella, reported a 128 percent year over year growth in its commercial cloud business, which Synergy says puts its share of the market based on revenues at just above 10 percent. IBM, meanwhile, reported an 80 percent increase in revenue for the quarter to gain a seven percent share of the market. The next biggest players, says Synergy, are Google, Salesforce.com and Rackspace.

With the cloud market itself worth somewhere north of $15 billion it is clear two classes of customers are emerging. There are customers with a lot of internal developer talent and cloud expertise that don’t need much help from an IT service provider. As such, they are more likely to be a little hard-nosed about pricing.

But more than half of the market clearly wants more hand-holding, which means that there’s roughly more than $7 billion in cloud revenue that is less likely to be the province of larger service providers such as AWS that pride themselves on being “faceless entities” in the cloud.

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Topics: Cloud Industry and Technology

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