Seattle vs. San Francisco: Who is tops in the cloud?

In football, city livability rankings — and now in the cloud — San Francisco and Seattle are shaping up as fierce rivals.

Who’s winning? Seattle, for now. It’s due mostly to the great work, vision and huge head-start of Amazon and Microsoft, the two top dogs in the fast-growing and increasingly vital cloud infrastructure services market. Cloud infrastructure services, also called IaaS, for Infrastructure as a Service, is that unique segment of the cloud market that enables dreamers, start-ups and established companies to roll-out innovative new applications and reach customers anytime, anywhere, from nearly any device.

Amazon Web Services (AWS) holds a commanding 29 percent share of the market. Microsoft (Azure), is second, with 10 percent. Silicon Valley’s Google remains well behind, as does San Francisco-based Salesforce (not shown in the graph below).

cloud leaders

The Emerald city shines

I spoke with Tim Porter, a managing director for Seattle-based Madrona Venture Group. Porter told me that “Seattle has clearly emerged as the cloud computing capital.  Beyond the obvious influence of AWS and strong No. 2, (Microsoft) Azure, Seattle has also been the destination of choice for other large players to set up their cloud engineering offices.  We’ve seen this from companies like Oracle, Hewlett-Packard, Apple and others.”

Seattle is also home to industry leaders ConcurChef, and Socrata, all of whom can only exist thanks to the cloud, and to 2nd Watch, which exists to help businesses successfully transition to the cloud. Google and Dropbox have also set up operations in the Emerald City to take advantage of the region’s cloud expertise. Not surprisingly, the New York Times said “Seattle has quickly become the center of the most intensive engineering in cloud computing.”

Seattle has another weapon at its disposal, one too quickly dismissed in the Bay Area: stability. Washington has tougher non-compete clauses than California, preventing some budding entrepreneurs from leaving the mother ship to start their own company. The consequence of such laws can lead to larger, more stable businesses, with the same employees interfacing with customers over many years. In the cloud, dependability is key to customers, many of whom are still hesitant to move all their operations off-premise.

Job hopping is also less of an issue. Jeff Ferry, who monitors enterprise cloud companies for the Daily Cloud, told me that while “Silicon Valley is great at taking a single idea and turning it into a really successful company, Seattle is better for building really big companies.”

The reason for this, he said, is that there are simply more jobs for skilled programmers and computing professionals in the Bay Area, making it easier to hop from job to job, place to place. This go-go environment may help grow Silicon Valley’s tech ecosystem, but it’s not necessarily the best environment for those hoping to create a scalable, sustainable cloud business. As Ferry says, “running a cloud involves a lot of painstaking detail.” This requires expertise, experience, and stability.

San Francisco (and Silicon Valley)

The battle is far from over. The San Francisco Bay Area has a sizable cloud presence, and it’s growing. Cisco and HP are tops in public and private cloud infrastructure. Rising star Box, which provides cloud-based storage and collaboration tools, started in the Seattle area but now has its corporate office in Silicon Valley. E-commerce giant Alibaba, which just so happens to operate the largest public cloud services company in China, recently announced that its first cloud computing center would be set up in Silicon Valley.

That’s just for starters.

I spoke with Byron Deeter, partner at Bessemer Venture Partners (BVP), which tracks the cloud industry. He told me that five largest “pure play” cloud companies by market cap are all in the Bay Area: Salesforce, LinkedIn, Workday, ServiceNow and NetSuite.

The Bay Area also has money. Lots of money. According to the National Venture Capital Association, nearly $50 billion in venture capital was invested last year. A whopping 57 percent went to California firms, with San Francisco, San Jose and Oakland garnering a rather astounding $24 billion. The Seattle area received only $1.2 billion.

venture capital by region

The Bay Area’s confluence of talent, rules and money will no doubt continue to foster a virtuous and self-sustaining ecosystem, one that encourages well-compensated employees to leave the nest, start their own business, and launch the next evolution in cloud innovation. If Seattle has big and focused, San Francisco has many and iterative.

The cloudy forecast

Admittedly, this isn’t sports. There’s no clock to run out and not everyone keeps score exactly the same. Just try to pin down Microsoft’s Azure revenues, for example. It’s also worth noting that the two regions do not compete on an even playing field. Washington has no personal or corporate income tax, and that is no doubt appealing to many — along with the mercifully lower price of real estate, both home and office.

The cloud powers healthcare, finance, retail, entertainment, our digital lives. It is increasingly vital to our always-on, from anywhere-economy, and a key driver of technical and business model innovation. If software is eating the world, the cloud is where it all goes to get digested. Here’s hoping both cities keep winning.

FlightCar launches its Seattle base

FlightCar, the company that lets you make money when you leave town by renting your car out to people at the airport, has opened another branch. Seattle marks FlightCar’s fourth U.S. airport, joining San Francisco, Los Angeles and Boston. “We’re growing 25 percent month over month in customers and revenue,” FlightCar CEO Rujul Zaparde told me. He says now that the company has mastered its new market playbook and raised its $13.5 million secondary series A, it will be expanding to future cities faster.

Comcast backs challenger to mayor who brought gigabit broadband to Seattle

The Washington Post followed the trail of Comcast’s campaign donations in the Seattle mayoral race and discovered that the ISP was backing the challenger to the current mayor who helped bring gigabit broadband to the city. The current mayor Mike McGinn has been a big proponent of bringing ultrafast broadband to Seattle, and in 2014 certain areas of Seattle are set to get gigabit broadband for $80 thanks to a pilot between the city and Gigabit Squared. I suppose that backing a rival that might not be as gung-ho for a gigabit is probably cheaper than laying fiber.

Seattle aims to capture excess data center heat for district heating

When I hear the words “district heating,” I often think of the potential for geothermal whereby geothermal heat is captured and rather than converted into electricity, it’s used directly to heat large portions of cities. Well, Seattle is looking into district heating but it’s not targeting geothermal as the the heat source. Rather the city is looking at capturing excess heat from its plethora of data centers and using the heat in commercial buildings.

The city is in discussions with Seattle Steam and utility company Corix to use excess heat from data centers in the South Lake Union area, a location that includes the new Amazon headquarters. The district heating/data center idea has been tried in Helsinki, Finland but this is the first I’ve heard of it being tried in the U.S. I’m a little skeptical just in terms of the actual volume of heat energy that can be captured from data centers to make a system worthwhile. But I do wonder whether in cities with existing district heating systems, data centers might be able to sell their excess heat back to the grid, maybe in the same vein that net metering is working for solar.

T-Mobile completes iPhone-friendly upgrade in 23 cities

Chicago, Reno, and the LA burbs join Atlanta, Minneapolis and Seattle as the newest areas of the country where an iPhone will work on T-Mobile’s 3G network. T-Mo is now about one-third of the way from completing its nationwide HSPA+ overhaul.