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Canalsys warns of a huge IT crisis

by on26 September 2014

IaaS players doomed

Big public infrastructure-as-a-service (IaaS) players may be on the brink of a crisis and are slashing prices while spending billions on building out and staffing their operations.

Steve Brazier, CEO at Canalys has warned resellers to be careful about the financials of their cloud suppliers because he fears a melt-down. He said that millions of dollars has been spent on building out public cloud infrastructure and yet no one in the world is profitable.

Amazon Web Services lost $2bn in the last four quarters, and the parent is forecasting losses of between $410m and $810m this quarter. Talking to the Channels Forum 2014 he said that the economics of the market is “somewhat like” the classic “pyramid scheme”, with providers launching services, making promises around performance, winning more customers, building more data centres, adding technicians, and cutting prices to beat the competition.

Maintaining that approach was only possible if you are getting new customers to sign up faster than your prices are going down. Rackspace, one of the “early pioneers” of public IaaS is trying to exit the sector and beef up its managed services biz.

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