Cloud Smbs Likely to Be Acquired, Oracle “Wandering,” Vmware Leading
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Susan Jennings Kantari, [email protected] Cloud SMBs Likely to Be Acquired, Oracle “Wandering,” VMware Leading Companies: AAPL, AMZN, CA, CRM, CSCO, CTXS, DELL, EMC, ETR:SAP/SAP, GOOG, HPQ, IBM, MSFT, ORCL, RAX, RHT, RNOW, TYL, VMW July 28, 2011 Research Question: What effect will cloud computing have on established IT companies, and which companies will be the winners and losers? Silo Summaries Summary of Findings 1) INDUSTRY SPECIALISTS SMBs are early adopters of the cloud while the Fortune 1000 are These five sources believe smaller and midsize expected to adopt self-contained clouds in the next three to six businesses (SMBs) will be acquired by larger firms, months. Widespread adoption is expected in five years. such as IBM. Leaders include Workday, VMware and Citrix in SaaS, SoftLayer, Amazon and Rackspace in Established IT companies will acquire smaller cloud IT companies IaaS and Azure and Salesforce.com in PaaS. Microsoft, in the next six to 12 months. Citrix and Nimbula were thought to be the most innovative in cloud computing. One source said Hewlett- Oracle Corp. (ORCL) lacks a coherent cloud strategy. An industry Packard and Oracle have yet to find their place. Another specialist described Oracle as “wandering” while a security source described Oracle as “wandering.” A third source specialist said its solutions are too expensive for SMBs. said security is an issue for Google, Amazon and Rackspace, and was the only one to speak negatively VMware Inc. (VMW) was named a cloud computing leader by nine about VMware, which he said is losing share among sources throughout all silos. users with ultra-dense equipment. Two software executives said Amazon.com Inc. (AMZN) is an IaaS 2) CLOUD SOFTWARE EXECUTIVES leader. It may lose share to the growing number of competitors, but All four sources named VMware as a leader, in still will see revenue rise as cloud computing expands. particular for PaaS. Other potential winners include VMware’s Cloud Foundry, Opscode, RightScale, Red PaaS leaders include Microsoft Corp.’s (MSFT) Azure, Hat, Salesforce.com and Google. Oracle is lagging in Salesforce.com Inc. (CRM), VMware and Red Hat Inc. (RHT). cloud innovations and lacks a coherent strategy. Its VMware, Citrix Systems Inc. (CTXS) and Workday Inc. are SaaS infrastructure software licenses are expected to be leaders. For IaaS, SoftLayer Technologies Inc., Amazon, Rackspace affected by the cloud as less-expensive alternatives Hosting Inc. (RAX) and Microsoft are in the lead. become available. Amazon’s revenue in IaaS should continue to rise, but it likely will lose share to the Two government IT sources said Apple Inc.’s (AAPL) products were growing number of competitors. being integrated into more enterprise and government workplaces. This confirms similar comments from our June 9 RIMM report. 3) SECURITY SPECIALISTS One of these three sources said security integration will come in the form of more partnerships in the next six to 12 months while another said cloud providers have yet to prove themselves in security. Two of three sources Established IT VMware’s Oracle’s named VMware as at the forefront. One source Companies to Position in Position in the described Oracle’s offerings as too expensive for SMBs. Acquire Cloud IT the Cloud Cloud Another said Amazon is a leader, but the third source SMBs said Amazon has stronger marketing than technology. Industry Specialists 4) GOVERNMENT IT PROFESSIONALS These three sources cited security concerns as the Cloud Software N/A main reason for slow cloud integration. Another source Executives said Google and Microsoft are the early leaders as they Security have gone through the stringent approval process. Two Specialists sources said Apple products are being integrated into more enterprise and government entities. Government IT N/A N/A Professionals 5) BUSINESS IT PROFESSIONALS These three sources cited many winners in the cloud Business IT computing sector, including Microsoft, VMware, N/A N/A Salesforce.com, SAP, Oracle and Google. Amazon will Professionals be added to the list if it can prove its reliability and Rackspace for IaaS. 1 321 Pacific Ave., San Francisco, CA 94111 | www.blueshiftideas.com Cloud Computing Background Blueshift Research’s Jan. 20 report revealed a crowded cloud marketplace, with different leaders at the IaaS (Amazon and Rackspace), PaaS (VMware and Google) and SaaS (Microsoft) layers. Blueshift also found that VMware was leading the virtualization of large company legacy systems. CURRENT RESEARCH This report will address how traditional IT companies will be affected by cloud computing and which cloud computing companies are emerging as the market leaders. Blueshift employed its pattern mining approach to establish and interview sources in six independent silos: 1) Industry specialists (5) 2) Cloud software executives (4) 3) Security specialists (3) 4) Government IT professionals (3) 5) Business IT professionals (3) 6) Secondary sources (3) Blueshift interviewed 18 primary sources, including two repeat sources, and included three of the most relevant secondary sources focused on Apple Inc.’s (AAPL) approach to the cloud compared with its competitors, a comparison of Microsoft Office 365 and Google’s cloud-based services, and a study of 1,500 UK organizations’ cloud IT intentions. Silos 1) INDUSTRY SPECIALISTS These five sources believe smaller and midsize businesses (SMBs) will be acquired by larger firms, such as IBM Corp. (IBM). Leaders include Workday, VMware and Citrix in SaaS, SoftLayer, Amazon and Rackspace in IaaS and Azure and Salesforce.com in PaaS. Microsoft, Citrix and Nimbula Inc. were thought to be the most innovative in cloud computing. One source said Hewlett-Packard Co. (HPQ) and Oracle have yet to find their place. Another source described Oracle as “wandering.” A third source said security is an issue for Google, Amazon and Rackspace, and was the only one to speak negatively about VMware, which he said is losing share among users with ultra-dense equipment. He believes Salesforce.com will gain share. Our gaming specialist believes the cloud will be integrated into the next generation of gaming devices, and already has become part of Sony Corp.’s (TYO:6758/SNE) PlayStation 3 and Microsoft’s Xbox. Blogger and owner of a privately held Internet solutions provider, Chicago area The source expects cloud orchestration and cloud application/OS management tools to take off within the next year, and named Microsoft, VMware and Citrix as the most likely enterprise leaders. The marketplace currently is scattered and more focused on marketing and not the technology. Amazon and Rackspace hold the IaaS market, purely from a marketing standpoint. Citrix and Nimbula are the most innovative cloud computing companies based on a recent acquisition of Cloud.com and an alluring sales model, respectively. Fortune There is still a problem where 1000 companies are expected to adopt private, self-contained clouds in the the marketplace is more than next three to six months. happy to get rid of managing . “Microsoft, VMware, Citrix—the big players—will be offering [cloud hardware, but they seem to orchestration and cloud application/OS management tools] first, at least on an enterprise scale. There is still a problem where the forget that they still need to marketplace is more than happy to get rid of managing hardware, but administer and manage their they seem to forget that they still need to administer and manage their applications. applications.” . “Here is what I’m hearing from customers, verbatim: ‘I hate dealing Blogger & Owner Internet Solutions Provider with my hardware, and I want to be on the cloud.’ I ask, ‘Why the 2 321 Pacific Ave., San Francisco, CA 94111 | www.blueshiftideas.com Cloud Computing cloud?’ Customer says, ‘I don’t know, but I want the cloud.’ The motivation is fear of dealing with hardware and fear of being left behind in the marketplace. It’s really interesting that it is a global marketing problem right now, not a technical one. Many smaller ‘cloud’ providers don’t even offer true cloud services. They are just rebranding Web hosting, and customers are buying in.” . “I’m just seeing common sense security practices from the IT side. It’s funny the news shows security as a huge issue, [but] IT is treating it as the same issue it has always been and the end customer still doesn’t seem to care too much.” . “I look at the winners from a marketing perspective at this time, and for positioning Amazon and Rackspace are in front. Amazon has the music cloud, EC2 services, and great branding power in the cloud arena. Rackspace as well. On the consumer side, it will be interesting what happens with Apple’s music cloud down the road.” . “My favorite [cloud computing company] is Nimbula. Great people behind it. And a great sales model to get people like me to use the product for free until a certain point of capacity. And Citrix since they recently made a smart acquisition of a small open-source group of Cloud.com.” . “I am seeing the early signs of merger acquisition. I have seen some small niche players being gobbled up by the larger players. And the smaller niche players don’t even have full product offerings yet; it’s just the technology. I don’t see [the overall] clear winners/losers yet.” Justin Lundy, cybersecurity specialist and CEO of Tegatai LLC In order to stay in the game, Google, which has been hacked and exhibited poor Expect to see an increasing cloud security, and Microsoft will need to absorb other security companies. Similarly missing security features have hurt Amazon’s and Rackspace’s market focus on secure cloud share. VMware also is losing market share based on a new licensing model that computing solutions that give financially penalizes users with ultra-dense equipment.