The Balance of Power Is Shifting in the Cloud Computing Industry – Business Insider

The pay-as-you-go cloud model, brought to market by Amazon and later adopted by Microsoft and Google, has long been criticized as creating "vendor lock-in," the scenario where customers can't switch to another provider because of cost or technical barriers.

If companies use those cloud giants' services, they're largely stuck in the giants' respective platforms, giving Amazon, Google, and Microsoft a lot of leverage in the IT market.

But a new trend has created an opening that gives more power to customers and, by extension, the software companies that work across the cloud giants. Specifically, customers are increasingly using multiple cloud providers across their IT infrastructure, in a model commonly called multicloud.

In the analyst firm Gartner's 2020 cloud survey, 76% of respondents said they used more than one cloud, and the trend is likely to grow as companies ask for not only more choice but more cost transparency from cloud providers. That demand is creating opportunity for hot companies like Databricks, Snowflake, and Datadog, execs tell Insider.

"Customers are more and more demanding 'Hey, the software I buy should just work on any cloud," Ali Ghodsi, the cofounder and CEO of Databricks, told Insider, "And that's giving us huge tailwinds."

Christian Kleinerman, Snowflake's senior vice president of product, said customers were asking Snowflake to get them to the cloud faster, making the company a gateway to the cloud giants. "Customers are in the driver's seat these days they're choosing best-of-breed, they're choosing the technology they want to work with," he told Insider in October.

Olivier Pomel, Datadog's CEO and cofounder, told Insider in May that the increase in multicloud and hybrid cloud deployments was helping its business because it worked as a "neutral body." "There is a need for somebody to actually tie together the data from all the different cloud providers," Pomel said. "The cloud providers themselves are not going to do that."

Amazon Web Services did not respond to an inquiry from Insider, and Microsoft declined to comment.

Sudhir Hasbe, a senior director of data analytics at Google Cloud, told Insider that it fully supported multicloud and wanted to be on the right side of the trend. "We don't expect all customers to put everything in one cloud," he said, adding that its partnership with Databricks helped companies that have their data across multiple providers.

As the multicloud model gains steam, companies like Databricks, Snowflake, and Datadog are also taking advantage of the leverage it offers them: Amazon, Microsoft, and Google all need to partner with these software firms to make their own platforms more attractive to customers, analysts say.

Ghodsi said Databricks helps customers move to the cloud and sometimes even choose a cloud provider. "That's made the cloud vendors want to partner closer with us, because they're like, oh, wow, we haven't heard of that customer," he said.

Most of Databricks's customers also use more than one cloud provider, and many are doing so to get their cloud bills under control, Ghodsi said. David Linthicum, Deloitte's chief cloud strategy officer, told Insider that shopping between three or four clouds was a common tactic to find bargains.

Some customers even seek out software companies to use as bargaining chips, telling the cloud giants, "Hey, I can use Databricks on any cloud, so give me a good price, because I can use it over there and over here," Ghodsi said.

Still, analysts like Gartner's Adam Ronthal say that no matter how much leverage those companies may gain by supporting multiple clouds, at the end of the day the cloud giants own the platforms that make their partners' products work.

Indeed, Databricks and its software peers all work with and compete against the Big Three in one way or another. But Ghodsi said he wasn't concerned about where the startup's relationship with them is headed.

"We bring literally billions of dollars of revenue to each of them, and they know that," he said. "They love to get more data into their cloud, so we're important for that too. So for that reason, they want to stay close to us."

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The Balance of Power Is Shifting in the Cloud Computing Industry - Business Insider