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OpenStack Cloud Bubble Has Started to Burst


It was a couple of years ago in march 2014 when we wrote about the small user base and penetration in the market of OpenStack, mostly compared with the investment made by vendors and VCs. At that time we estimated that the investment in OpenStack was approximately $300 million per year. This was quite conservative, there were other estimates above $0.5 billion per year, some reaching to $1 billion per year. These estimates mainly include development cost and marketing of upstream OpenStack community. Additionally, there are other direct costs from many companies also allocating resources to develop their proprietary OpenStack distribution, training or documentation, a big overhead in indirect costs, and of course opportunity costs.

Some months after this post, in September 2014, 451 Research made public a market analysis forecasting that OpenStack market was growing from $883 million in revenue in 2014 to $1.7 billion in 2016, with service providers with clouds enabled by OpenStack representing 73% of that revenue total. This revenue is relatively very small in comparison with the investment being made and the revenue of the market leaders such as VMware ($6 billion in 2014 ), AWS (now close to $7 billion a year) and Red Hat Linux (now close to $2 billion a year). Cumulative investment was disproportionate to any realistic return. It just does not seem feasible that there is room for several vendors to profit from OpenStack. There were sufficient indicators, for those willing to open their eyes, showing that OpenStack was in a bubble.


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More Stories By Ignacio M. Llorente

Dr. Llorente is Director of the OpenNebula Project and CEO & co-founder at C12G Labs. He is an entrepreneur and researcher in the field of cloud and distributed computing, having managed several international projects and initiatives on Cloud Computing, and authored many articles in the leading journals and proceedings books. Dr. Llorente is one of the pioneers and world's leading authorities on Cloud Computing. He has held several appointments as independent expert and consultant for the European Commission and several companies and national governments. He has given many keynotes and invited talks in the main international events in cloud computing, has served on several Groups of Experts on Cloud Computing convened by international organizations, such as the European Commission and the World Economic Forum, and has contributed to several Cloud Computing panels and roadmaps. He founded and co-chaired the Open Grid Forum Working Group on Open Cloud Computing Interface, and has participated in the main European projects in Cloud Computing. Llorente holds a Ph.D in Computer Science (UCM) and an Executive MBA (IE Business School), and is a Full Professor (Catedratico) and the Head of the Distributed Systems Architecture Group at UCM.

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