IBM was the driving force in the computer industry beginning with the advent of the IBM 360 mainframe family. Their big idea was to build a family of computer systems that all ran the same software and, generally, used the same peripherals.

The IBM 360 was a brilliant idea and a massive success, making IBM the growth stock for a decade. It also made IBM the giant of the industry, with a 70-80% market share.

What happened to AWS?
Three years ago it looked like AWS was set to be the IBM of cloud, with, by some estimates an 80% market share. AWS is still the clear leader, but the competition has made major inroads, and will continue to chip away at their lead.

Tl;dr: Different inputs; different outputs.

Longer version –

  • Competition. Early on, IBM’s competition were small firms started by techies who had no idea how to sell to the large companies that were IBM’s bread and butter. Later, some of these firms were bought by larger companies, like NCR and Remington Rand, that were limited by internal politics and/or their particular customer base.
  • Distribution. In the 50s, 60s, and 70s, direct sales was about the only channel, and then, as now, it was expensive, requiring massive investments in people and local infrastructure. IBM had that already, and they leveraged it well.
  • Support. As the excellent movie Hidden Figures showed, early computers were complex, cranky, and a world away from the calculators and tabulating machines that dominated business processing. IBM had its problems with the 360 rollout, but they were expert at keeping customers in the fold.
  • Investment. IBM went all in with the 360 project, investing the equivalent of $5 billion in today’s dollars, building new factories, writing new software, and, of course, designing new hardware. IBM – and their customers – endured massive pain in the process, but, paradoxically, the pain united customers to IBM – Stockholm syndrome – and gave IBM a giant leap up the learning curve.
  • Software. IBM was plowing virgin ground, but today the prevalence of open source software makes it hard to build a sustainable and significant differentiator. AWS is beavering away to create software lock-in, but the pace of change in software – where were containers five years ago? – means today’s lock-in is tomorrow’s old news.

It’s a new world
AWS faces a very different world than IBM did in 1960. Its competitors are large, profitable, and, most importantly, well differentiated from AWS.

  • Microsoft is working off its Windows base, leveraging the Microsoft Research brain trust, and its massive financial clout. AWS hires bright people too, but MR has a much deeper bench.
  • IBM is leveraging its long term relationships with enterprises to take the lead in private cloud management and support. IBM also has a significant research arm, and it looks like their endemic “suits vs geeks” warfare has been tamped down in the cloud efforts.
  • Google, is, surprisingly, the weakest player in this group, which underscores just how tough the competition is. Under Eric Schmidt Google whiffed the cloud market, but Larry Page seems serious about making up for lost time. Google is the least in tune with customers, but has strong roots with developers and, like Amazon, their own massive and profitable infrastructure to build on. They might even figure out how to leverage their Android base.

Dark horses
HPE seems to have dropped out of the race, but Dell/EMC might figure out something that augments their installed base, much as what NetApp is attempting. Slim chance, but that’s why they’re a dark horse.

Despite all its misfires online, Apple might get its act together and build something great on its iOS base. Yes, slim chance, but they’ve got money and, maybe, vision. Execution is their problem in this space.

Facebook. They’ve got the scale and the money to compete and become the Everyman’s cloud infrastructure, taking a piece of Microsoft and Apple.

The Storagemojo take
In five years the specter of AWS cloud dominance will be a distant memory. The potential cloud market is enormous and we are, in effect, where the computer industry was in 1965. AWS will be successful, just not dominant. No tears for AWS.

Also, we should remember the downsides of IBM’s dominance. They fought interactive computing and peer-to-peer networking. And while they invented the disk drive, they also worked hard to keep customers locked into proprietary interfaces, impeding the development of a robust storage industry, until they took their eye off the ball.

It’s good for the industry and customers that there are four powerful cloud competitors, as well as tempting private cloud options. Expect the rapid development of the cloud market to continue apace, with benefits for all consumers – and challenges for the competitors.

Courteous comments welcome, of course.