There aren't a lot of companies scrambling for the top of the hardware mountain, but the companies that use server hardware seem to grow like weeds. Cloud startups have been popping up all over the place, and there are plenty of established companies looking to expand their presence. Who will win in the long term? If history is any guide, whoever makes the best use of scale -- and pairs that scale with the most accessible options -- will win the day.
Which cloud companies offer their wares utility-style, whether bare-bones fashion or on top of a platform? Let's look at the biggest, best, and brightest competitors in this cloudy arena.
Infrastructure supremacy
It's impossible to discuss cloud infrastructure providers -- whose digital wares come closest to resembling bare machines -- without discussing Amazon.com (Nasdaq: AMZN). Its Elastic Compute Cloud is the cloud infrastructure gold standard. Besides ranking among the top supercomputers in the world, the service (a critical part of Amazon Web Services) has attracted 60,000 customers, which include major banks, pharmaceutical companies, and other large businesses. For big companies that need only the occasional burst of intense computation, renting a supercomputer makes good business sense.
Rackspace Hosting (NYSE: RAX) also boasts a major presence in infrastructure computing through its Cloud Servers service. Though known more for its hosting options (as the name might imply), Rackspace was operating almost 80,000 servers by the end of 2011's third quarter, and its infrastructure provisions are similar to Amazon's. Rackspace doesn't focus on infrastructure because it believes that "naked" cloud computing is largely commoditized. That might be true, but most smaller companies can't afford even 1,000 servers, let alone 80,000. Scale could keep Rackspace's service profitable for some time.
Several other companies have a presence in utility computing, but none matches up to Amazon's scale. Verizon bought Terremark early in 2011 to move into the utility computing space. AT&T is also involved in utility computing through Synaptic Compute as a Service. Both companies are ideal cloud players thanks to the server requirements demanded of mobile carriers, but neither matches Amazon or Rackspace for scale. IBM also offers utility computing but seems more focused on its platform and software options. VMWare (NYSE: VMW) has taken a leadership role in private cloud infrastructure and has the Fool IT department's seal of approval.
A platform to stand on
Infrastructure computing is great for wide-ranging projects, but some developers prefer the familiarity of a platform. Platforms are better for tightly defined projects, and some cloud-computing companies might use their own platforms to provide software as well. Microsoft and salesforce.com (NYSE: CRM) both work this way, though developers have more freedom on Microsoft's Azure than on Force.com, the Salesforce platform.
Microsoft has been acting more like Amazon by offering infrastructure-style options within Azure, but the framework persists. Microsoft's .NET language is a key component of the Azure experience, which can be limiting to programmers who aren't well versed, or who don't consider .NET the best way to solve a given problem. Force.com is rather like programming for dummies, offering object-oriented development in which most of the objects are already programmed in.
Just about every cloud infrastructure provider offers platform services as well. Some are more popular than others. Amazon will probably never be primarily known for its platform services, just as Google will probably never become the go-to utility computing company. The search giant focuses its cloud offerings on software, making a platform solution ideal.
Digital storage lockers
It's not likely you'll find a company offering cloud services without some form of storage. Amazon's Simple Storage Service has been growing exponentially, and it might field half a million file requests per second during peak times. VMWare doesn't have much in the way of storage, but it's largely owned by storage giant EMC (NYSE: EMC), which continues to post record-breaking quarters on strong cloud storage demand.
Tale of the tape
How do all these companies compare? Let's take a quick look at those most identified with the cloud (sorry, telecoms).
|
Company |
P/E |
3 –Year Revenue Growth |
Trailing Year Profit Margin |
|---|---|---|---|
| Amazon | 102.5 | 122.5% | 2% |
| Rackspace | 92.4 | 82.4% | 6.8% |
| IBM | 14.6 | 35.8% | 14.8% |
| VMWare | 54.3 | 125.5% | 19.2% |
| Microsoft | 10.7 | 53% | 32.6% |
| Salesforce | 7,798.0 | 91.6% | 0.2% |
| 19.7 | 91.6% | 25.7% | |
| EMC | 23.5 | 71.1% | 12.3% |
Sources: Yahoo! Finance and YCharts.
These numbers don't tell the whole picture, but it's interesting to note that the most highly valued company sports the slimmest profit margin. This list isn't exhaustive, but the most popular cloud infrastructures and cloud platforms are well represented. Although VMWare and EMC are costlier than yesterday's tech titans, they're growing rapidly and have solid profit margins. That makes them worth keeping an eye on, in my view.
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