IDC Canada has released a new IDC MarketScape report profiling and assessing the pros and cons of the leading vendors in the Canadian IaaS cloud computing market. While in their first such report, in 2013, Amazon Web Services sat alone at the pinnacle in IDC’s Leaders category, this time, IBM and Microsoft joined AWS as a Leader. Interestingly, at this point in time, IBM is the only one of the three with Canadian-based data centres.
IDC also identified eight other cloud vendors closely grouped in the Major Players tier below the three leaders: Bell Canada; Telus; Cogeco; Internap; SherWeb; CentriLogic; Rackforce and CenturyLink. While other firms were also assessed in the report, the firms in the Leaders and Major Players categories make up 95 per cent of the Canadian market. All the companies in the Major Players category do have Canadian delivery systems.
The Canadian cloud market is very different from the American, said Mark Schrutt, Research Vice President, Services and Enterprise Applications at IDC Canada.
“Canada is three per cent of the global marketplace and the U.S. is about 50 per cent.” Schrutt said. “This makes it a different market in Canada. You don’t have the same kind of ecosystem as in the US, don’t have companies like Netflix who are huge users. It’s a situation where Canadians can cross border shop and buy from Amazon or Rackspace, who aren’t based in Canada.”
Going forward, the declining Canadian dollar is likely to impact this kind of cross border shopping, just as it has at the consumer level.
“We were at par for so long, and the state of the market reflected that,” Schrutt said. “As the dollar has slipped, it will have an impact.”
Schrutt said that Canadian cloud use is progressing at a respectable rate.
“About 20 per cent of firms in Canada are now using IaaS to some degree,” he said. “That’s an increase of 5 per cent from last year, and we expect it will increase another 5 per cent next year. Canadians are adopting the cloud, but the U.S. remains a year to two years ahead.”
IaaS consumption among SMBs in Canada remains disproportionately strong compared to the enterprise and midmarket.
“The cloud began with innovative startups, who were smaller businesses, and in Canada, the cloud market is SMB by far,” Schrutt said. “Large enterprise and midmarket firms do use it, but even midmarket firms that have been in business for a while have legacy technology and IT staffs that have to be paid off, and their doesn’t necessarily migrate well to the cloud. SMBs aren’t as invested in their technology, so are more open to cloud.”
Schrutt said while he would not classify cloud provider competition in Canada as cutthroat, he did say that it was very competitive.
“AWS got to their present position by mass markets and low cost, but some Canadian vendors don’t match their price because they provide more value,” he said. “Many Canadian buyers prefer to have a managed cloud service, not just self-serve where you provision it yourself. The Canadian vendors provide extra services around application and customer support, but you do have to pay for them. This managed component is huge. In-Canada delivery is important to many Canadian buyers. Very few regulations here stop buying from the U.S, but many Canadians are cautious.”
Still, given that two of the top three Canadian providers have their data centres in the U.S., and that competition is strong, what are the prospects for the Canadian-based providers?
“Hardware and software vendors also realize more of their market is cloud services, whether they sell it through the channel or direct,” he added. “Cloud services is growing over 20 per cent. IaaS is growing 40%, and the growth rate for the next five years is all over 5 per cent.
“You will see some consolidation in Canada, in terms of the data centres. At the same time, the number of actual providers — VARs and SIs – will increase, but the engine behind them, the number of data centres, will see a shrinkage,” Schrutt said.
For those VARs and SI, the cloud remains a very significant opportunity,” Schrutt said.
“They are seeing their margins and also their topline revenues go down,” he said. “The cloud is a life raft that gives them more stickiness with their customers.”