Cloud computing has played a starring role in the technology press for the past 2-3 years, but it’s now moving from the haven of startups and random corporate side projects seeking flexible and cheap computing on Amazon’s Web Services to enterprises figuring out how to use on-demand compute capacity to change their IT cost structure and eventually link their internal applications to public clouds. So get ready for another round of acquisitions and maybe investments.
IBM today purchased a cloud computing startup called Cast Iron, that helps tie internal software to applications running in the cloud, and Intel contributed to a $40 million funding round to an infrastructure-as-a-service provider’s first round of funding. Both investments are aimed squarely at helping enterprise buyers adopt cloud computing by addressing some of the shortfalls that have so far kept enterprise IT from doing so.
One reason IBM was so keen on Cast Iron is that it has three different business offerings: one that links on-premise apps to other on-premise apps, one that links on-premise apps to the cloud and one that links clouds one another, said Promod Haque, a managing partner with Norwest Venture Partners, a Cast Iron investor. He noted that IBM liked that Cast Iron wasn’t focused on one small aspect of the cloud computing opportunity, but could help enterprises support apps across a variable environment.
That’s a wise move, as enterprises aren’t going to hop wholesale into the cloud. CA has also recently decided to acquire several startups aimed at performing a similar support function for corporate customers trying out infrastructure, platforms or even software as a service. Most enterprise customers will have a strategy that covers on-premise clouds with other service providers, be they infrastructure providers like Savvis or software such as Salesforce.com.
Backing up the internal cloud idea was a note I received today from a Deutsche Bank analyst that said enterprise IT buyers are now trying to think in terms of virtual machines rather than servers — an admission that terms associated with virtualization and cloud computing are infiltrating the vocabulary of enterprise IT buyers. It also a boon for Cisco’s Unified Computing Systems gear so far, according to the note.
Our industry contacts note that Cisco has meaningfully changed the competitive dynamic, especially versus HP, by discussing price quotes for the Vblock package in terms of number of virtual machines (typical quotes in the 1000s of VMs) instead of in conventional terms such as number of x86 blade servers, number of switches, etc. We note from our first-hand experience in this topic that large enterprise CIOs are more receptive to engaging in dialog involving upgrades to their datacenter infrastructures on a ‘number of virtual machines’ basis than conventional server centric metrics.
The shift toward virtual machines on the hardware side is also joined by the rise in platforms as a service — such as Microsoft Azure or Google’s AppEngine — aimed at enterprise customers. Last week Salesforce and VMware launched their VMforce cloud with a bang providing reluctant enterprises with an easy on-ramp to multitenant, on-demand computing, without them ever needing to care they were buying access to cloud computing rather than a platform for home-grown apps (GigaOM Pro sub req’d).
The adoption of true on-demand computing and enterprises buying into the platform and infrastructure-as-a-service models will change the services demanded of the large technology vendors. As those vendors adapt to their customers’ wants, expect them to continue buying cloud startups to meet that demand. The best positioned will likely have something easy to deploy (like a SaaS or an appliance) and will also recognize that enterprises need products that can work for the hybrid environments enterprise customers will likely have for years to come.
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