Category Archives: Industry
SoftLayer and ThePlanet merge
When I was told during HostingCon that private-equity firm GI Partners was acquiring a controlling interest in SoftLayer, my first question was, “Will it be merged with The Planet?” I got a coy answer about what would be logical, and now, it seems, the answer is indeed yes.
The two companies have an interesting mutual history that both might like to forget now — the founders of SoftLayer left The Planet a little over five years ago, leaving some amount of acrimony in their wake (expressed by a still-ongoing lawsuit that will presumably be put to rest now). Industry rumor back then said that the SoftLayer founders were essentially the movers and shakers at The Planet, and that their departure gutted significant talent from the company. By leaving, they missed the results of the GI Partners acquisition of The Planet, subsequent merger with EV1 Servers, and so forth. Management has changed almost entirely at The Planet in the intervening years, making the reconciliation of a merger completely reasonable, but it’s an interesting irony that SoftLayer’s CEO is going to get to come back to run the merged company. It’s also worth noting that the degree of common genesis ought to make this an easier merger than might otherwise be the case.
SoftLayer has been growing at an incredible pace, taking advantage of the same trend towards highly-automated, on-demand, self-managed infrastructure that Amazon has been riding high on. The Planet brings the rest of a hosting product portfolio to the game, so it’s an entirely sensible match. Also, for SoftLayer, the change in capitalization structure should be strongly beneficial, letting them get away from the equipment-leasing trap they’ve been in.
GI Partners has had a solid record of success in the data center space thus far — their other previous investments were Digital Realty Trust (wholesale data center leasing) and Telx (carrier hoteling and carrier-neutral colocation) — and the integration of The Planet and EV1 Servers clearly built a stronger company. I think merging fast-moving companies in the midst of a radically changing market is a dangerous, difficult proposition, since it risks loss of momentum, management confusion and distraction, and so forth, so this will be one to watch — it could build a much stronger merged company, or it could be disruptive to existing success.
There’s been a lot of M&A buzz around the hosting industry of late. Consolidation makes sense in the scale business of cloud, and there are also lots of companies seeking to move up-market with managed hosting offerings. Arguably, the thing that is preventing more M&A activity right now is that there simply aren’t great acquisition targets in the places where people are looking.
Rackspace and OpenStack
Rackspace is open-sourcing its cloud software — Cloud Files and Cloud Servers — and merging its codebase and roadmap with NASA’s Nebula project (not to be confused with OpenNebula), in order to form a broader community project called OpenStack. This will be hypervisor-neutral, and initially supports Xen (which Rackspace uses) and KVM (which NASA uses), and there’s a fairly broad set of vendors who have committed to contributing to the stack or integrating with it.
While my colleagues and I intend to write a full-fledged research note on this, I feel like shooting from the hip on my blog, since the research note will take a while to get done.
I’ve said before that hosters have traditionally been integrators, not developers of technology, yet the cloud, with its strong emphasis on automation, and its status as an emerging technology without true turnkey solutions at this stage, has forced hosters into becoming developers.
I think the decision to open-source its cloud stack reinforces Rackspace’s market positioning as a services company, and not a software company — whereas many of its cloud competitors have defined themselves as software companies (Amazon, GoGrid, and Joyent, notably).
At the same time, open sourcing is not necessarily a way to software success. Rackspace has a whole host of new challenges that it will have to meet. First, it must ensure that the roadmap of the new project aligns sufficiently with its own needs, since it has decided that it will use the project’s public codebase for its own service. Second, it now has to manage and just as importantly, lead, an open-source community, getting useful commits from outside contributors and managing the commit process. (Rackspace and NASA have formed a board for governance of the project, on which they have multiple seats but are in the minority.) Third, as with all such things, there are potential code-quality issues, the impact of which become significantly magnified when running operations at massive scale.
In general, though, this move is indicative of the struggle that the hosting industry is going through right now. VMware’s price point is too high, it’ll become even higher for those who want to adopt “Redwood” (vCloud), and the initial vCloud release is not a true turnkey service provider solution. This is forcing everyone into looking at alternatives, which will potentially threaten VMware’s ability to dominate the future of cloud IaaS. The compelling value proposition of single pane of glass management for hybrid clouds is the key argument for having VMware both in the enterprise and in outsourced clouds; if the service providers don’t enthusiastically embrace this technology (something which is increasingly threatening), the single pane of glass management will go to a vendor other than VMware, probably someone hypervisor-neutral. Citrix, with its recent moves to be much more service provider friendly, is in a good position to benefit from this. So are hypervisor-neutral cloud management software vendors, like Cloud.com.
HostingCon (and Booth Babes)
I’m on my way home from HostingCon. I wish I had decided to stay an extra day. I originally expected I’d give my Monday keynote and be free to roam and have various conversations with random people, have plenty of time to wander the show floor, and so on. Instead, my schedule filled up rapidly with clients and friends-of-clients (for instance, folks with relationships with our investment banking clients who tugged some strings), plus other folks who grabbed me on email beforehand.
Great things have happened with the show since iNet Interactive took over running it — the audience has become much more diverse in terms of the types of attendees, and in general, it’s a smoothly-run, very professional show, quite a change from the past. I enjoyed having the chance to deliver the opening keynote, as well as my formal and informal conversations with people.
I wish I’d had more time than the 30 minutes I had to spend on the show floor. But there’s been a very interesting backchannel discussion happening on Twitter #HostingCon) that I want to highlight, and that’s the subject of booth babes.
Much to my surprise, there were several exhibitors who brought booth babes — you know the classic sort, in super-skimpy outfits, arrayed in front of their booths. A number of female attendees have called this out on Twitter, but just as interesting are the retweets and supporting objections that come from male attendees. This was particularly stark because of the near total absence of women from the conference; the attendance is overwhelmingly male, and so there was little female representation in either attendees or exhibitors. This was true to even a far greater extent than I’m accustomed to seeing at IT conferences.
So, vendors, here’s a set of reasons why you should not bring booth babes. (And especially not to something like HostingCon, where much of the audience is C-level executives, and it’s all about the business and networking.)
1. You imply your audience is immature and/or unprofessional. Booth babes imply that you think that your audience’s primary interest is in staring at boobs, as opposed to getting serious business done. Moreover, there’s no way to look professional while ogling, and even those people who would like to ogle don’t want to do so in front of people that they’re doing business with. Unless you’re E3 and your audience is adolescents and overgrown adolescents, this is a bad tactic. (And you can argue that booth babes ended up significantly contributing to the death of E3 as a serious trade show.)
2. You imply that your company’s offerings are less interesting than the flesh on display. Yes, everyone needs to do something to draw in traffic, but booth babes smack of desperation. But you do this by having a compelling display that makes people want to come have conversations, not by having booth babes shoving trinkets at people. People grab the trinkets and then don’t have the conversations.
3. You actually make it harder for people to get to the booth itself. This is especially true on crowded show floors, where the booth babes basically form a wall in front of your booth. This makes it hard to see your display, your collateral, and the nametags of the people you have staffing your booth (important for any attendee who is trying to do some networking). Chances are that a lot of people simply don’t make it through the obstacle, especially if they’re casually perusing the floor, rather than looking for you specifically.
I chose not to talk to any exhibitor with booth babes. It wasn’t really a principle thing; I’m not actually offended, just bemused. It was simply a practical matter.
I don’t think conference organizations necessarily need to have rules against booth babes, per se. I simply think that companies should exercise good sense when thinking about where they’re exhibiting and who they’re exhibiting to.
Recent research notes
Here’s a round-up of what I’ve written lately, for those of you that are Gartner clients and are following my research:
Data Center Managed Services: Regional Differences in the Move Toward the Cloud is about how the IaaS market will evolve differently in each of the major regions of the world. We’re seeing significant adoption differences between the United States, Western Europe (and Canada follows the WEU pattern), and Asia, both in terms of buyer desires and service provider evolution.
Web Hosting and Cloud Infrastructure Prices, North America, 2010 is my regular update to the state of the hosting and cloud IaaS markets, targeted at end-users (IT buyers).
Content Delivery Network Services and Pricing, 2010 is my regular update of end-user (buyer) advice, providing a brief overview of the current state of the market.
Is a Cloud Content Delivery Network Right for You? is a look at Amazon CloudFront and the other emerging “cloud CDN” services (Rackspace/Limelight, GoGrid/EdgeCast, Microsoft’s CDN for Azure, etc.). It’s a hot topic of inquiry at the moment (interestingly, mostly among Akamai customers hoping to reduce their costs).
Some of my colleagues have also recently published notes that might be of interest to those of you who follow my research. Those notes include:
- Andrea di Maio’s Criteria for Government to Evaluate Cloud Computing
- PaaS analysts collaborating on VMware and Salesforce.com: The Beginning of a Beautiful Friendship?
- Adam Couture and Stan Zaffos’s SNIA Launches First Cloud Storage Standard
- Matt Cain’s Make or Break Time for Microsoft Cloud E-Mail
Shifting the software optimization burden
Historically, software vendors haven’t had to care too much about exactly how their software performed. Enterprise IT managers are all too familiar with the experience of buying commercial software packages and/or working with integrators in order to deliver software solutions that have turned out to consume far more hardware than was originally projected (and thus caused the overall project to cost more than anticipated). Indeed, many integrators simply don’t have anyone on hand that’s really a decent architect, and lack the experience on the operations side to accurately gauge what’s needed and how it should be configured in the first place.
Software vendors needed to fix performance issues so severe that they were making the software unusable, but they did not especially care whether a reasonably efficient piece of software was 10% or even 20% more efficient, and given how underutilize enterprise data centers typically are, enterprises didn’t necessarily care, either. It was cheaper and easier to simply throw hardware at the problem rather than to worry about either performance optimization in software, or proper hardware architecture and tuning.
Software as a service turns that equation around sharply, whether multi-tenant or hosted single-tenant. Now, the SaaS vendor is responsible for the operational costs, and therefore the SaaS vendor is incentivized to pay attention to performance, since it directly affects their own costs.
Since traditional ISVs are increasingly offering their software in a SaaS model (usually via a single-tenant hosted solution), this trend is good even for those who are running software in their own internal data centers — performance optimizations prioritized for the hosted side of the business should make their way into the main branch as well.
I am not, by the way, a believer that multi-tenant SaaS is inherently significantly superior to single-tenant, from a total cost of ownership, and total value of opportunity, perspective. Theoretically, with multi-tenancy, you can get better capacity utilization, lower operational costs, and so forth. But multi-tenant SaaS can be extremely expensive to develop. Furthermore, a retrofit of a single-tenant solution into a multi-tenant one is a software project burdened with both incredible risk and cost, in many cases, and it diverts resources that could otherwise be used to improve the software’s core value proposition. As a result, there is, and will continue to be, a significant market for infrastructure solutions that can help regular ISVs offer a SaaS model in a cost-effective way without having to significantly retool their software.
Credit cards and EA/Mythic’s epic billing mistake
Most of us have long since overcome our fear of handing over our credit cards to Internet merchants. It’s become routine for most of us to simply do so. We buy stuff, we sign up for subscriptions, it’s just like handing over plastic anytime else. For that matter, most of us have never really thought about all that credit card data laying around in the hands of brick-and-mortar merchants with whom we do business, until the unfortunate times when that data gets mass-compromised.
Bad billing problems plague lots of organizations, but Electronic Arts (in the form of its Mythic Entertainment studio, which does the massively multiplayer online RPGs Dark Ages of Camelot and Warhammer Online) just had a major screw-up: a severe billing system error that, several days ago, repeatedly charged customers their subscription fees. Not just one extra charge, but, some users say, more than sixty. Worse still, the error reportedly affected not just current customers, but past customers. A month’s subscription is $15, but users can pre-pay for as much as a year. And these days, with credit cards so often actually being checking-account debit cards, that is often an immediate hit to the wallet. So you can imagine the impact on even users with decent bank balances, being hit by multiple charges. (Plenty of people with good-sized savings cushions only keep enough money in the checking account to cover expected bills, so you don’t have to be on the actual fiscal edge to get smacked with overdraft fees.) EA is scrambling to get this straightened out, of course, but this is every company’s worst billing nightmare, and it comes at a time when EA and its competitors are all scrambling to shift their business models online.
How many merchants that you don’t do business with any longer, but used to have recurring billing permission on your credit card, still have your credit card on file? As online commerce and micropayments proliferate, how many more merchants will store that data? (Or will PayPal, Apple’s storefronts, and other payment services rule the world?)
Q1 2010 inquiry in review
My professional life has gotten even busier — something that I thought was impossible, until I saw how far out my inquiry calendar was being booked. As usual, my blogging has suffered for it, as has my writing output in general. Nearly all of my writing now seems to be done in airports, while waiting for flights.
The things that clients are asking me about has changed in a big way since my Q4 2009 commentary, although this is partially due to an effort to shift some of my workload to other analysts on my team, so I can focus on the stuff that’s cutting edge rather than routine. I’ve been trying to shed as much of the routine colocation and data center leasing inquiry onto other analysts as possible, for instance; reviewing space-and-power contracts isn’t exactly rocket science, and I can get the trends information I need without needing to look at a zillion individual contracts.
Probably the biggest surprise of the quarter is how intensively my CDN inquiry has ramped up. It’s Akamai and more Akamai, for the most part — renewals, new contracts, and almost always, competitive bids. With aggressive new pricing across the board, a willingness to negotiate (and an often-confusing contract structure), and serious prospecting for new business, Akamai is generating a volume of CDN inquiry for me that I’ve never seen before, and I talk to a lot of customers in general. Limelight is in nearly all of these bids, too, by the way, and the competition in general has been very interesting — particularly AT&T. Given Gartner’s client base, my CDN inquiry is highly diversified; I see a tremendous amount of e-commerce, enterprise application acceleration, electronic software delivery and whatnot, in addition to video deals. (I’ve seen as many as 15 CDN deals in a week, lately.)
The application acceleration market in general is seeing some new innovations, especially on the software end (check out vendors like Aptimize), and there will be more ADN offers will be launched by the major CDN vendors this year. The question of, “Do you really need an ADN, or can you get enough speed with hardware and/or software?” is certainly a key one right now, due to the big delta in price between pure content offload and dynamic acceleration.
By the way, if you have not seen Akamai CEO Paul Sagan’s “Leading through Adversity” talk given at MIT Sloan, you might find it interesting — it’s his personal perspective on the company’s history. (His speech starts around the 5:30 mark, and is followed by open Q&A, although unfortunately the audio cuts out in one of the most interesting bits.)
Most of the rest of my inquiry time is focused around cloud computing inquiries, primarily of a general strategic sort, but also with plenty of near-term adoption of IaaS. Traditional pure-dedicated hosting inquiry, as I mentioned in my last round-up, is pretty much dead — just about every deal has some virtualized utility component, and when it doesn’t, the vendor has to offer some kind of flexible pricing arrangement. Unusually, I’m beginning to take more and more inquiry from traditional data center outsourcing clients who are now looking at shifting their sourcing model. And we’re seeing some sharp regional trends in the evolution of the cloud market that are the subject of an upcoming research note.
Cloud ecosystems for small businesses
As I’ve been predicting for a while, Microsoft and Intuit have joined forces around Quickbooks and Azure: Microsoft and Intuit announced that Intuit would name Microsoft’s Windows Azure as the preferred platform for cloud app development on its Intuit Partner Platform. This is an eminently logical partnership. MSDN developers, are a critical channel for reaching the small business with applications, Azure is evolving to be well-suited to that community, and Intuit’s Quickbooks is a key anchor application for the small business. Think of this partnership as the equivalent of Force.com for the small business; arguably, Quickbooks is an even more compelling anchor application for a PaaS ecosystem than CRM is.
A lot of non-IT companies are thinking about cloud strategies these days. I get a great deal of inquiry from companies seeking to target the small business with cloud offerings, and the question that I keep having to ask is, “What natural value does your existing business bring when extended to the cloud?” An astounding number of strategy people at miscellaneous companies seem to believe that they ought to be cloud IaaS providers, or resellers of other people’s SaaS solutions for small businesses — without being natural places for small businesses to turn for either infrastructure or software.
Whatever your business is, if you want to create a cloud ecosystem, you need an anchor service. Take something that you do today, and leverage cloud precepts. Consider doing something like creating a data service around it, opening up an API, and the like. (Gartner clients: My colleague Eric Knipp has written a useful research note on this topic entitled Open RESTful APIs are Big Business.) Use that as the centerpiece for an ecosystem of related services from partners, and the community of users.
VMware buys Zimbra
Hot on the heels of a day of rumors, VMware announced the acquisition of Zimbra, the open-source email platform vendor previously purchased (and up until now, still owned by) Yahoo!.
It’s a somewhat puzzling acquisition. Its key strategic thrust seems to be enabling the service provider ecosystem. Most service providers (i.e., hosters) already offer email as a service — although today, they primarily offer Hosted Exchange. Other platforms — Open-Xchange, OpenWave, Critical Path, Mirapoint, etc. — are used for more commodity email services. Relatively speaking, Zimbra doesn’t have as much traction in the service provider space, and VMware’s service provider ecosystem is not gasping for lack of reasonable platforms on which to offer email SaaS.
The email SaaS space is super-competitive. Businesses have come to the realization that email is a commodity that can be safely outsourced, and that huge cost savings can be realized by outsourcing it; this is driving rapid growth of mailboxes delivered as SaaS, but it’s also driving aggressive price competition. That, in turn, drives service providers to push their underlying email software vendors for lower license costs.
One has to speculate, then, that this acquisition is not just about email. It’s about the broader platform strategy, and the degree to which VMware wants to own an entire stack.
My colleagues and I are working on publishing a Gartner position (a “First Take”) on this acquisition, so I’m sorry to be a bit brief, and cryptic.
Gmail, Macquarie, and US regulation
Google continues to successfully push Gmail into higher education, in an Australian deal with Macquarie University. (Microsoft is its primary competitor in this market, but for Microsoft, most such Live@edu represent cannibalization of their higher ed Exchange base.)
That, by itself, isn’t a particularly interesting announcement. Email SaaS is a huge trend, and the low-cost .edu offerings have been gaining particular momentum. What caught my eye was this:
The university was hesitant to move staff members on to Gmail due to regulatory and cost factors. They were concerned that their email messages would be subject to draconian US law. In particular, they were worried about protecting their intellectual property under the Patriot Act and Digital Millennium Copyright Act, Mr. Bailey said. “In the end, Google agreed to store that data under EU jurisdiction, which we accepted,” he said.
That tells us that Google can divide their data storage into zones if need be, as one would expect, but it also tells us that they can do so for particular customers (presumably, given Google’s approach to the world, as a configurable, automated thing, and not as a one-off).
However, the remark about the Patriot Act and DMCA is what really caught my attention. DMCA is a worry for universities (due to the high likelihood of pirated media), but USA PATRIOT is a significant worry for a lot of the non-US clients that I talk to about cloud computing, especially those in Europe — to the point where I speak with clients who won’t use US-based vendors, even if the infrastructure itself is in Europe. (Australian clients are more likely to end up with a vendor that has somewhat local infrastructure to begin with, due to the latency issues.)
Cross-border issues are a serious barrier to cloud adoption in Europe in general, often due to regulatory requirements to keep data within-country (or sometimes less stringently, within the EU). That will make it more difficult for European cloud computing vendors to gain significant operational scale. (Whether this will also be the case in Asia remains to be seen.)
But if you’re in the US, it’s worth thinking about how the Patriot Act is perceived outside the US, and how it and any similar measures will limit the desire to use US-based cloud vendors. A lot of US-based folks tell me that they don’t understand why anyone would worry about it, but the “you should just trust that the US government won’t abuse it” story plays considerably less well elsewhere in the world.
CloudPundit: Massive-Scale Computing 