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The True Titan of the Virtualized Server and Cloud Infrastructure Sector

By Paul Rubens (Send Email)
Posted June 26, 2016

It's often said that VMware is the 400-pound gorilla of server virtualization. That means Microsoft's Hyper-V must be the 200-pound gorilla, while Xen, KVM and all the other hypervisors are featherweight baby gorillas weighing in at under 100 pounds each.

Now as we all know, much of the server virtualization that goes on today actually goes on in the cloud. Virtually Speaking So if we didn't know better we might well assume that VMware is the top banana in the cloud. By a long shot.

But that isn't even close to being the case, as a recent report from Synergy Research Group recently highlighted. When it comes to all cloud infrastructure services (IaaS, PaaS, private cloud and hybrid cloud combined) there is a 400 (or probably 600) pound gorilla — and that monkey's name is Amazon.

That may not be a complete surprise, but what probably is an eyebrow raiser is the extent to which Amazon dominates the market for virtualized servers in cloud infrastructure. Get this: Amazon, by itself, accounts for 31% — so just about one third — of the total cloud infrastructure services market.

That's a huge proportion for just one company. Especially when you consider how large the market is.

Cloud Infrastructure Service Revenues Pass $7 Billion

Synergy estimates that quarterly cloud infrastructure service revenues have now comfortably passed the $7 billion milestone. (Growth rates remain similar across the major regions, meaning that the United States continues to account for around half of the worldwide market.)

The next three biggest cloud players are Microsoft (with Azure), IBM (with SoftLayer), and Google, with 22% of the market. Not 22% each, mind you, but 22% between the three of them.

That's right, Amazon is bigger than the next three biggest competitors combined.

So what about VMware? Well, it turns out that VMware is in the third batch of companies, which makes up 27% of the market.

But here's the thing. That next batch includes VMware, but it also includes 19 other companies such as household names like Fujitsu, Oracle, Salesforce and Rackspace, as well as more obscure ones like CenturyLink and Orange.

(The remaining 20% is accounted for by "others".)

And if that's not surprising enough, it's worth taking a look at the rate of growth of these companies' cloud businesses. Amazon's is growing at an impressive 57% year on year, while the VMware group is growing at a more modest 41% year on year.

41% may be more modest, but it nonetheless sounds impressive — until you realize that the market is growing at a rate of about 50% year on year.

"This is a market that is so big and is growing so rapidly that companies can be growing by 10-30% per year and might feel good about themselves and yet they'd still be losing market share," said John Dinsdale, a chief analyst and research director at Synergy Research Group.

(Of course, it may not be the case that VMware is losing market share as no specific VMware figures are available in the report, just figures for the VMware group as a whole. But it certainly doesn't look good.)

The King of the Hypervisor Cloud

When it comes to hypervisors, it turns out then that Xen is the king of the cloud. That's because both Amazon and SoftLayer use Xen (as does Rackspace). Google uses KVM, while Azure uses a Hyper-V derivative known as the Microsoft Azure Hypervisor. VMware's hypervisor doesn't really figure until you get right down to VMware's own cloud efforts like vCloud Air.

"The big question for (smaller companies) is whether or not they are building a sustainable and profitable (cloud infrastructure) business," says Dinsdale. "This can be done by focusing on specific regions or specific services, but the bulk of the market demands huge scale, a broad footprint, very deep pockets and a long-term corporate focus."

If that's true then unless there is enough demand for a public cloud that offers specific VMware services, VMware's public cloud efforts may have been doomed from the start.

Paul Rubens is a technology journalist and contributor to ServerWatch, EnterpriseNetworkingPlanet and EnterpriseMobileToday. He has also covered technology for international newspapers and magazines including The Economist and The Financial Times since 1991.

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