OpenStack-related business models to exceed $4bn by 2019

451 Research tracks the evolving OpenStack business models through its Market Monitor offering, a market-sizing and forecasting service that offers a bottom-up market size, share and forecast analysis for the rapidly evolving marketplace for OpenStack-related products and services. The service provides detailed information on the 56 vendors in the OpenStack marketplace, including a listing of each vendor and its products, and a view of the competitive landscape. This service tracks key market segments whose vendors support OpenStack or base their services on the OpenStack framework: service providers, IT services, distributions and training. The OpenStack Market Monitor no longer includes PaaS and cloud management vendor revenue associated with OpenStack. Those estimates are fully included in our Cloud Enabling Technologies forecasts.

The 451 Take

Our OpenStack market estimate and forecast was derived using a bottom-up analysis of each vendor's current revenue generation and growth prospects. Of the 56 companies included within our estimate, eight out of 10 have directly provided revenue guidance. Based on our research, we continue to believe the market is still in the early stages of enterprise use and revenue generation. Our Market Monitor service expects total OpenStack-related revenue to exceed $4bn by 2019. Revenue overwhelmingly comes from the service provider space, with in increasing portion coming from private cloud deployments rather than public IaaS. We expect an uptick in revenue from all sectors, especially from OpenStack products and distributions that are primarily targeting enterprises.

In the early days of OpenStack, established vendors and startup companies were mainly focused on providing services to design and build private cloud environments for big data and DevOps that blended development and IT operations for speed, efficiency and other advantages. As OpenStack matured, there was an increase in enterprise adoption and a corollary rise in vendors deploying supported products and managed services. Today, category leaders in most enterprise verticals are relying on OpenStack private clouds for production and mission-critical applications and services along with a growing number of vendors providing OpenStack software and support in various business models.

OpenStack market is growing at 35% CAGR
451 Research's Market Monitor focuses on 56 vendors that provide direct OpenStack offerings, including products, services and turnkey offerings around OpenStack deployment and management, different distributions of OpenStack, service providers and training services. Although we do consider some vendors with integrated hardware, systems and software offerings based on OpenStack, our market-sizing estimate does not include hardware-centric revenue, nor does it include revenue from indirect third-party vendors, such as those in storage or software-defined networking.

Service providers
Service providers, companies that host private and public cloud platforms based fully or in part on the OpenStack architecture and its APIs, compose the majority of OpenStack revenue. We are targeting $1.781bn for this group in 2017 and $3.2bn in 2019. Currently, public cloud revenue is dominant. These vendors accounted for 49% of total OpenStack revenue in 2015. However, we expect OpenStack private cloud service provider revenue to exceed public cloud providers by 2019. Hewlett Packard Enterprise made a notable exit from the OpenStack public cloud market in 2015. In the private cloud space, the top five vendors (Rackspace, OVH, IBM, HPE, KIO Networks) accounted for 66% of the revenue in 2015.

Among the other service providers are Anchor, BlueHost, City Network, CloudVPS, DreamHost, Elastx, Ensim, Enter srl, Globe Telecom, GoDaddy, Internap, Kili, Netpace, Numericable SA, Orange, OVH, Rackspace, Red Hat, UnitedStack and VEXXHOST

Distributions, IT services, training
The OpenStack distributions revenue includes the cost of any licensing and the associated support costs. Usually, an OpenStack distro is 'free,' and the customer only pays for support. According to 451 Research's OpenStack Market Monitor, OpenStack distribution revenue will rise from $207m in 2017 to $375m in 2019. Vendors with a distribution offering coupled with managed services or a turnkey hardware/software appliance are included in this segment. In terms of the number of paying customers, we rank Red Hat, Mirantis, Canonical and SUSE as the top four distributions. While it does not disclose a customer count, VMware's VMware Integrated OpenStack (VIO) distribution clients are 100% existing VMware vCenter customers, and its largest deployment to date is 150 hypervisors.

IT services include helping with initial consulting, configuration and installation of an OpenStack-based private or public cloud, as well as any ongoing management of the environment. This is separate from support given to a distro user. This segment will grow to $802m by 2019. Training services have the highest CAGR (51%) among the tracked segments. In scope are payments received from students attending a formal OpenStack-related training class and certification exam fees. The implied value of free classes or training provided to clients is not included. The 13 vendors we monitor that offer training are expected to be a $100m business by 2019. The OpenStack Foundation's creation of formal certification programs has been a catalyst for growth.

Other vendors in this category include 99Cloud, Aptira, AURO, Breqwatr, Bright Computing, Cisco, EasyStack, EMC, HPE, IBM, Netpace, Oracle, Penguin Computing, Platform9, Rackspace, Solinea, StackStorm, Stratus, SwiftStack, TransCirrus and ZeroStack.

The open source cloud project is not without its shortcomings, but it remains a credible cloud option for many IT professionals and suppliers. Due to a lack of disclosed use cases and vendor disinclination to report revenue from the project, our market sizing of OpenStack represents a living study. As the OpenStack platform evolves, we may break out additional sectors, and we plan to continue our assessment of the OpenStack market size.

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