Cisco. Hewlett-Packard. Rackspace. Verizon. CenturyLink. AT&T. VMware. One-by-one, Amazon Web Services has systematically snuffed out the hosted hyperscale compute competition in recent years, carving out its place at the head of the proverbial public cloud table. After their swift defeat, the laundry list of companies mentioned above went back to their core businesses, and many even incorporated AWS into their core products and offerings. The old, “if you can’t beat ‘em, join ‘em.” approach.

A distant second and third to AWS in the public cloud marketplace are Microsoft Azure and Google Cloud Platform, both siting well behind their Amazon counterpart in popularity. That could soon change, however, as Azure and GCP continue to grow like wildfire.

The battle for public cloud supremacy will only continue to heat up moving forward, and that’s bad news for any public cloud provider not named Amazon, Microsoft, Google or IBM.

But what about the private cloud holdouts? Can they survive the battle of the Big Four, or are we destined for a future of public cloud homogeneity?

Spoiler alert: we are.

The Big Four Three

As industry-leading IT consultants, Shamrock Consulting Group has had a front row seat to this massive migration to the cloud. And we’re not talking about the kind of private cloud that some companies think they have because they have their own data center – moving your servers into a room with better AC and power is not a cloud migration, it’s a data center move, silly. We’re talking about a proper movement to the cloud, which constitutes making your company’s compute and storage infrastructure a 3rd party responsibility, with the theoretical capability of infinite scalability, of course. It’s called “hyperscale” my dudes and dudettes – ever heard of it?

We’ve helped hundreds of IT decision makers move their company’s data to a public cloud environment, and it really hasn’t been a difficult decision for them, either. Instead, the biggest challenge our clients face isn’t whether to migrate to a public cloud; it’s which platform to do it with.

In our experience, this decision almost always comes down to the three-headed monster: AWS, Azure, or Google Cloud Platform, with a few exceptions mixed in. While I recognize that IBM Cloud is still part of the broader Big Four and Watson AI does kick some major butt, I don’t think anyone under the age of 35 gives a s#@! about IBM, and I don’t see every cloud bound app needing Watson AI built into it anytime soon. I may catch some flak for saying that, but it’s the truth.

Private Cloud Canary in the Coal Mine

As the calendar has turned to 2018, more enterprises continue to turn away from the private cloud industry. For every individual company we’ve seen going with a private cloud option, there are 15-20 going with a public one. And that’s just the large migrations. Smaller migrations – the ones that don’t require consultants to help facilitate — are happening in droves every single day.

According to the “State of the Cloud 2017” report released by one of Shamrock’s strategic partners, RightScale, the waning proportion of enterprise IT teams who have been tasked with building private cloud networks went from 23% in 2016, to just 9% a year later. As a whole, private cloud adoption decreased by 5%, while public cloud adoption increased by 22% this past year.

It should be said that companies have shown an increase in their hybrid cloud usage, but as single private and multiple private clouds continue to fall out of favor, the hybrid cloud of the future is increasingly looking like one that will be comprised of multiple public clouds.

And with so much tangible evidence suggesting a major shift towards public cloud platforms, Cloud Reserved Instances may just be the death knell for private clouds.

What are Reserved Instances?

Ever since public clouds were introduced into the marketplace, a fiery debate has been waged over whether the cost savings promoted by cloud providers were actually valid. 64% of cloud-focused enterprises view cost control as their number one concern, and yet 50% of them still underestimate their cloud spend!

There have always been automated options for shutting down unused VMs in favor of leaner deployments, but with so many companies still being plagued by considerable wasted cloud spend, an alternative option is necessary. Enter: Reserved Instances.

Reserved Instances (RIs) enable companies to reserve compute resources ahead of time, which delivers huge savings on hourly rates, especially with regards to predictable workflows. RIs are also heavily discounted (for example, AWS knocks up to 75% off its standard hourly costs).

Focusing on AWS, the level of discount applied is determined by three factors:

Instance attributes (resource booked, area, tenancy type, platform, etc.)
Term booked (one to three years)
Payment method (businesses can choose to make a full up-front payment, partial up-front payment or no up-front payment at all)

Should a specific business’ needs change to where they no longer need their RI, there is a marketplace where they can sell the resource to a third party. This also means that businesses can sometimes increase discounts further by purchasing RIs from the marketplace rather than the cloud provider directly.

By slashing costs considerably, one of the main selling points of going private has effectively been removed.

The Power of Big Brands

Not only can public cloud providers offer deeper price cuts than their private counterparts, they also dominate the marketing landscape. The brands of Amazon, Microsoft, Google and IBM are so familiar to consumers that they are more likely to trust them on name alone versus a lesser-known private cloud provider.

There is also an issue with definitions. While it is relatively easy to define a public cloud, a private cloud can mean different things to different people. Some private cloud providers are, on closer inspection, offering cloud services or infrastructure rather than an integrated private cloud.

With such widespread confusion surrounding private clouds, it is much easier to market public cloud space to businesses, and Reserved Instances are yet another powerful weapon in the big public cloud players’ arsenals.

The Tipping Point

At the end of the day, private cloud advocates can scream until they’re blue in the face about the advantages of private over public clouds, but what really matters with customers – especially the largest ones – is perceived value. And the proof is in the pudding for who is winning this battle for loyalty: the public cloud market is now so huge (over $200 billion) that the top tier public cloud providers (AWS, Azure, etc.) make as much money as the entire private cloud industry combined.

As public cloud providers continue to outpace their private rivals, the competition within the public cloud space will only intensify. And as it does, expect to see Reserved Instances come down in price, leading more and more large companies to take advantage of the obvious savings.

Simply put, private clouds are on shaky ground. There may be some outlier M&A deals between private cloud providers going forward, but the benefits that public cloud platforms offer are so impossible to ignore that they’ll eventually lead the private cloud industry to collapse entirely.

Shamrock Consulting – Your Secret Weapon for Cloud Strategy

Regardless of which public, private or hybrid cloud deployment you choose, there will inevitably be many decisions to be made regarding utilization of specific components and set up options.

Shamrock’s cloud experts specialize in cloud deployments, optimization, financial analysis and cloud financial planning. We offer a free service to identify your company’s areas of cloud over-expenditure, and we can also help you spec out and right size Reserved Instance purchases.

Additionally, we’ve partnered with each of the four major public cloud providers to offer direct connections via their respective on-ramps (AWS Direct Connect, Azure Express Route, Google Interconnect and IBM Cloud Direct Link) at the guaranteed best price, and we’re also the exclusive provider for 100G direct connects into AWS Direct Connect and Google Cloud Interconnect.

Ben Ferguson

Ben Ferguson

Ben Ferguson is the Vice President and Senior Network Architect for Shamrock Consulting Group, an industry leader in digital transformation solutions. Since his departure from Biochemical research in 2004, Ben has built core competencies around cloud direct connects and cloud cost reduction, enterprise wide area network architecture, high density data center deployments, cybersecurity and Voice over IP telephony. Ben has designed hundreds of complex networks for some of the largest companies in the world and he’s helped Shamrock become a top partner of the 3 largest public cloud platforms for AWS, Azure and GCP consulting. When he takes the occasional break from designing networks, he enjoys surfing, golf, working out, trying new restaurants and spending time with his wife, Linsey, his son, Weston and his dog, Hamilton.