Cloud Ecosystem Dynamics

Assertion 8: Because the largest providers drive the largest benefits, only a handful of cloud providers will survive.


Large providers are likely to have price advantages, brand awareness advantages, proprietary technology advantages, and geographic footprint advantages over midsize ones.

However, price advantages due to volume buying power or statistical multiplexing of user demand may not be so compelling as to overcome other areas in which smaller providers can differentiate themselves. There are many elements of differentiation besides cost: customer intimacy and relationships, brand, specialization, proximity/latency and thus improved response time, compliance, portfolio synergies, customization support, reciprocity, and the like. Consequently, in the same way that the panoply of retail providers comprises more than just Walmart and Target, there are likely to be a number of providers leading in various niches. Walmart is surely a juggernaut, yet 7-Eleven manages to compete based on convenience, clothing shops based on tailoring and customization, tax accountants based on expertise and customer intimacy, and designer shops based on ego buyers.

Telecommunications firms or carrier-neutral interconnection and colocation facilities that can offer smaller data centers closer to customers and on net can satisfy both server huggers and challenging latency requirements. Country regulations are likely to keep much of the market fragmented: Most countries ...

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