Why Amazon and OpenStack Continue to Thrive in a Complex Cloud World

NEWS ANALYSIS: Cloud milestones—Amazon announcing AWS hitting a $10B annual run rate and OpenStack's 13th release—lead some to wonder who is winning. Both are.

OpenStack vs. AWS

A decade ago, the cloud was not a computing term and Amazon was best known as an online retailer of consumer goods like books. Now the company is on track to generate $10 billion in annual revenue from its Amazon Web Services (AWS) cloud business.

On the other side of the story is the OpenStack cloud platform that emerged in 2010 as an open-source community-built alternative to AWS. This past week, OpenStack released its 13th update, dubbed Mitaka, and boasts the support of some of the largest IT vendors on the planet.

Although Amazon and OpenStack are competitive in some ways, in others, they aren't. That is why, at this point in 2016, both continue to thrive.

In a letter to shareholders, published April 5, Amazon founder and CEO Jeff Bezos commented on the rapid growth of AWS. "AWS is bigger than Amazon.com was at 10 years old, growing at a faster rate, and—most noteworthy in my view—the pace of innovation continues to accelerate—we announced 722 significant new features and services in 2015, a 40 percent increase over 2014," Bezos wrote.

Amazon first began to publicly disclose its AWS revenue in April 2015, when cloud revenue was reported at $1.57 billion. In the second quarter, AWS reported net sales of $1.8 billion, and in the third quarter, Amazon's cloud business reported revenue of $2.1 billion.

"Whether you are a startup founded yesterday or a business that has been around for 140 years, the cloud is providing all of us with unbelievable opportunities to reinvent our businesses, add new customer experiences, redeploy capital to fuel growth, increase security, and do all of this so much faster than before," Bezos wrote.

At this point, the business value of the cloud is something that many organizations understand. What isn't always clear, though, is which cloud provider to choose and whether a private or hybrid cloud approach is appropriate for a given organization. In the public cloud market, Amazon is going toe-to-toe with Google and Microsoft, in what often feels like a race to the bottom in terms of price.

When OpenStack got started in 2010, the early promise was that it would serve as a viable AWS competitor. In fact, a key feature in nearly every major OpenStack release has been various forms of API compatibility with AWS in order make it easier for organizations to adopt and potentially interoperate with AWS.

For most of the last six years, though, when it comes to the public cloud, Rackspace has been the primary vendor offering OpenStack. Yet, in 2016, Rackspace has somewhat retreated from its public cloud focus. During Rackspace's fourth quarter and full year fiscal 2015 earnings call, CEO Taylor Rhodes stated that the company's focus is changing.

"We are shifting engineering and marketing resources from our OpenStack public cloud to our new offers, including our OpenStack private cloud, which is growing in the high-double digits," Rhodes said.

Rackspace is seeing growth in the private cloud marketplace for OpenStack, an area in which AWS is somewhat lacking. While organizations can choose to run private cloud deployments with AWS, they are always still running on Amazon's hardware in Amazon data centers. With OpenStack, organizations can run their own hardware, wherever they choose.

Although Rackspace is retreating somewhat from the public cloud space, others are not. In 2016 so far, midmarket cloud vendors, including Dreamhost and GoDaddy, have both announced the general availability of OpenStack public cloud services.

Sean Michael Kerner

Sean Michael Kerner

Sean Michael Kerner is an Internet consultant, strategist, and contributor to several leading IT business web sites.