The cloud revolution we are currently witnessing shares a number of parallels with the virtualization movement that empowered the enterprise datacenter over the last decade. At the core of both of these tectonic shifts were clear platform disruptions spurred by Amazon Web Services (AWS) and VMware respectively. Similar to how VMware jumped out to an early lead in x86 virtualization market, AWS has shown early dominance in the public cloud market. The predominant early adopter use-case at the heart of both of these movements has been test/development environments.
Building on its test/dev era momentum, VMware successfully navigated to its next phase of growth around the end of 2008 as enterprise customers began to migrate production workloads to virtualized environments. Once customer comfort level was established with this use case, VMware license revenue continued its rapid upswing through the end of the decade.
The similarities in the initial adoption profile across these two market disruptions led me to take a closer look at the x86 server virtualization market growth trajectory to see what else we might learn. It turns out that a deeper examination of how this market evolved is an extremely informative exercise to help provide greater comfort and appreciation for the real market growth potential for cloud computing.
The Test & Development Era in the Cloud
In November of 2012, almost seven years into the adoption of its Simple Storage Service (S3), AWS announced that greater than 1.3 trillion objects had been stored in the S3 service. Given AWS’ initial market dominance, the number of objects stored in their S3 repository serves as the most accurate proxy for growth and adoption in this early phase of the cloud market. In the same vein, the x86 virtualization market was initially dominated by VMware’s success in test and development. Consequently, VMware’s software license revenue through this period from ’02-‘08 serves as the most accurate measure of early server virtualization market growth. Overlaying the growth trajectories from the initial ramp of the cloud and virtualization platforms in their formative years shows a remarkably similar early adoption profile.
The Test/Development Era – x86 Virtualization vs. Cloud
Entering The Production Era
Projecting out the next phase of growth in cloud computing surely will be dependent on the ability for cloud Service Providers to architect a VMware-like market transition from primarily test and development workloads to production applications. However, no single service provider, not even AWS, can affect this transition alone. Driving the delivery of production workloads from the cloud requires commitment and innovation across the cloud ecosystem equal or greater than that demonstrated by the ISV and hardware vendor community that supports VMware. Today’s cloud ecosystem vendors are stepping up to support cloud’s advancement by building in features to support multi-tenancy, self-service via automation, and leveraging new architectures to drive increased scale. Similarly, Amazon continues to add services to support production environments including Route 53, VPCs, Direct Connect and traditional relational database certifications. If the revenue growth realized by VMware from successfully navigating their transition is any indication, the potential returns to be had from investing in the Production Era of cloud computing will more than offset the upfront investments.
The Production Opportunity
Building off the Test/Dev era comparison from earlier, the graph below plots VMware’s actual license revenue growth over the ten-year period from ’02 (YR1) to ’12 (YR11) against early cloud computing growth in its first 7 years (using AWS S3 objects as the proxy). Missing from this graph, as the history is still to be written, is what happens in the next phase of cloud computing. AWS announced that, only 1/3rd of the way through 2013, S3 objects stored had eclipsed the 2 trillion mark. If this pace continues, by the end of 2013 cloud adoption will show a significantly accelerated growth trajectory relative to the same period of x86 virtualization adoption. In this context, cloud computing’s initial adoption trajectory is pretty impressive, especially considering we are only now just scratching the surface of the opportunity for production applications.
The Production Era Opportunity
Bridging The Gap
While the x86 server virtualization market evolution has presented us with an intriguing template for what could lie ahead in the cloud computing market, it is not yet a forgone conclusion that things will materialize in a similar fashion. Certainly the early parallels between the test/development phases of these markets are too compelling to ignore. But continued innovation needs to occur across the cloud infrastructure ecosystem to yield similar growth rates compared to what was experienced in the Production Era of server virtualization.
Similar to the “virtualization first” mandate that helped drive the majority of incremental workloads to virtualized environments; IT departments are increasingly subjecting applications to “cloud-first” scrutiny. With this type of adoption stimulant in place, the opportunity for cloud providers to help facilitate the Production Era of cloud computing is there for the taking. For the market to have any chance of realizing its full potential, service providers must be able to confidently, and economically, address the more stringent demands of mission and business critical applications. In the x86 server virtualization market VMware was able to answer the bell. In the cloud computing market the time is now for service providers to do the same.
By Dave Cahill