If Michael Russinovich, CTO for Microsoft Azure, is correct in his predictions, niche cloud providers will eventually vanish or be gobbled up by their bigger competitors. The reason? Russinovich said in an interview with V3 that there is currently space in the cloud computing market for niche players, but without the ability to scale, those providers are doomed.

The logic behind Russinovich’s statement is that the bigger players can offer the same (and more) services with the ability to provide customers with scalability. In essence, customers have much more flexibility for growth with Azure, Amazon Web Services (AWS), Google Compute Engine (GOOG) and the like than they do with the smaller infrastructure-as-a-service (IaaS) players.

Additionally, as the big boys of the schoolyard continue to broaden their reach and variety of services, Russinovich believes that eventually the top IaaS providers will be offering the same services currently offered by niche players.

Although Russinovich didn’t suggest when the end of the line for smaller cloud services providers would happen, he did note that customers have to make a “strategic bet” on who they use for cloud providers, and they need to know they’ll “be around in 10 years.”

Of course, this is an executive from the same company that laughed at the Google Chromebook, which is showing continued growth in sales.

But that’s not to say Russinovich doesn’t have a point. It seems overly harsh to suggest all smaller cloud providers are doomed. Let’s face it: There are always end users looking for an alternative to the market-leading products and services out there. That’s how Google Apps became not only a reality but a strong contender in the office productivity space, and it’s also why WordPerfect is still around.

There for sure will be a certain amount of consolidation in the cloud market, and that likely will mean some cloud providers are doomed. Some will go out of business. Others will be acquired.