This afternoon I was talking with Sumitro Sarkar from TechStrategy Labs, who provides pricing and cost analysis for cloud implementations. Wall Street media were abuzz today about a "massive sell off" of cloud-computing related stocks, spurred by earnings warnings by two fairly visible cloud-related companies, Equinix and Autonomy. Articles on Barrons, Forbes, and other sites expressed alarm that Equinix adjusted their earnings estimate downward based in part on "greater than expected discounting..." Barrons listed several other data center vendors who posted losses on the day.
Yet IBM closed the day up 0.18. Although Sumitro and I both agreed that there is no measureable correlation right now between the industry's perception of cloud computing and IBM's stock price, there is--at least possibly--some insights to be gleaned from these data points.
The cloud computing market is much bigger than data center vendors. Indeed, UK--based Autonomy, also cited in Barrons as issuing a warning that spurred the sell-off, is a software infrastructure provider. And Autonomy's business is broader than the cloud, so a warnings statement from them is not exactly a bellweather of the state of cloud computing. There are many aspects to cloud computing--from the tools that enable applications on the cloud to virtualization technologies to the applications end users access--so it's a bit dangerous to draw dire conclusions from the stock fluctuations of a few companies in the data center and hosting business.
But there is an even finer point to observe in the Equinix statement. There are discounting pressures on the hosting providers. This is a sign of a market moving out of the nascent stage, and that has a distinct pattern in the computing industry: In order to continue winning business, cloud vendors will need to differentiate themselves and provide demonstrated value. This will be true for vendors across the entire cloud ecosystem. A "me too" approach at any layer of the cloud will not suffice, regardless of the discounts provided.
There is plenty of room at the table for vendors of all sizes and value propositions. There is plenty of opportunity for growth for all the current participants in cloud. But any vendor who wants a long future needs to be absolutely clear who they serve and how they deliver value.
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