"How can cloud service providers compete with the might of Amazon?"
That has been the question on many people's lips during the GigaOm Structure Europe conference in London over the past couple of days.
The subject was dealt with head-on by Ditlev Bredahl, CEO of OnApp, a cloud content deliver network (CDN) provider, and by Tony Lucas, founder and vice president of product at cloud management software company Flexiant, both of whom had different ideas about how service providers should proceed.
Bredahl spoke out in favour of federation.
"Why is Amazon winning?" he asked. "When you ask customers what they want, they say uptime, support and a good price. But look at Amazon. Their uptime is questionable, their support is non-existent and their prices are really high, once you break it all down.
"The reason that they are winning comes down to three reasons: scale, geographical reach and products," he continued.
Bredahl said that a strategy of federation could help service providers compete. Citing a recent case in which he lost a customer to Amazon because of their ability to scale, he said that service providers should combine forces by pooling their excess capacity.
To this end, he said, OnApp has developed a federated CDN to enable even small providers to take on Amazon by concentrating on their core strength - providing tailored services with quick response times. Scaled up to thousands of users, he continued, "operating under a single UI and with common APIs a CDN could easily rival Amazon for scale while retaining their core competencies".
Lucas agreed that Amazon was a threat to smaller providers, but suggested that the federated solution would always remain a minority activity, at best.
Amazon can scale because it has the capital, he said. "At the moment they're building a data centre per quarter. They could build one every month if they wanted to. The problem with the federated solution is how do you differentiate yourself? How will you compete with all these other companies?"
Secondly, service providers are going to find new ways to use their spare capacity to benefit them directly, rather than the federated network as a whole.
Flexiant's approach instead provides cloud management software that enables service providers to resell a portfolio of services.
Whatever the answer, both debaters agreed that something had to be done to challenge Amazon.
"If [small] service providers don't work together," said Bredahl, "we're going to look back at these years and say 'this was when the long tail of our industry disappeared', just like it has in other industries that are scale based. In such industries you are left with five big players. An exception is distribution where the industry is federated," he said.