Amazon to See a New Cloud Market in 2013

NEW YORK ( TheStreet) -- This has not been a good year for the ( AMZN) cloud, or at least its Virginia data center.

The system suffered its fourth outage of the year on Christmas Eve, ruining Netflix' ( NFLX) Christmas. This followed outages in October , in June and in April . Each time the same data center was implicated.

This is not the way the cloud is supposed to work. The cloud is not a data center. Even a data center using cloud technology gets you just half-way to cloud. A cloud is, in fact, a network of data centers, providing you with the redundancy and resilience of the Internet itself.

Google ( GOOG) developed many basic cloud technologies, and has the biggest cloud of them all. It's the model for what cloud can be. Other aspects of the technology were developed within Yahoo! ( YHOO), and that company has refocused on technology and software, aiming to become a serious player. Google had been reluctant, until recently, to re-sell cloud capacity, preferring instead to provide services based on its infrastructure. But that changed in 2012.

Amazon also has a network of data centers, but most customers don't take advantage of that redundancy. They prefer to save money by putting all their eggs in one basket. Even when they don't, most have so many customers in the northeast that a Virginia outage impacts them dramatically. Netflix mirrors its content in many different places, and yet it was hit as hard as anyone this month.

No more. Change is coming to the cloud. The cloud is going to become all it can be, starting next year.

Most big enterprises have given only small workloads to the cloud so far, but that is part of what will change. These companies have seen savings from virtualized systems, from distributed workloads, and they are ready to take the next step, rewriting key applications for this new infrastructure, building a platform on which they will offer services.

Remember those words. Infrastructure -- provided as a Service it's IaaS. Platform -- provided as a Service it becomes PaaS. Both acronyms descend from Software as a Service, or SaaS, which has been around for decades. But when SaaS hits a real cloud infrastructure it finally fulfills its promise.

For many, OpenStack will be the answer. OpenStack is open source, and most major enterprise players now support it.

Red Hat ( RHT) has focused its own Open Shift platform on OpenStack. Rackspace ( RAX), the original sponsor, has more OpenStack experts than anyone and has finally shifted its own operations to it.

Dell ( DELL) and Hewlett-Packard ( HPQ) are both building global cloud networks based on OpenStack. So are most major telcos. IBM ( IBM) is a platinum sponsor of the code base.

There are ways in which companies can have their Openstack and Amazon, too. Eucalyptus , led by former mySQL head Marten Mickos, is among those working hard to bridge the gap between Amazon EC2 and these new open source clouds.

Amazon's dominant share in the cloud is going down as that of OpenStack is going up. Companies are going to be building their own "private" clouds in 2013, and many will want public clouds that support the same system, creating a so-called "hybrid" cloud. They won't mind the extra expense if they get redundancy, resiliency and a single throat they can choke if something goes wrong.

For the cloud, 2012 has been a year of commitment, and 2013 will be a year of action. This is negative for Amazon. But this will be good for the cloud.

At the time of publication the author had positions in GOOG, IBM, YHOO and RHT.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.