VMware CEO Pat Gelsinger

This “VMware vCloud Hybrid Service,” to be run from partner data centers and sold by VMware’s channel but managed by VMware, is slated to come online later this year. VMware pitches it as a way for the company’s 480,000 customers “to reap the benefits of the public cloud without changing their existing applications while using a common management, orchestration, networking and security model.”

But VMware faces a raft of challenges.

Too little too late?

First of all, many of those VMware customers have already tested out other cloud offerings — Amazon Web Services, or a third party service provider, MSP or hosting company, they’re already in the cloud in some way. AWS, for better or worse, has set the bar high when it comes to pay-as-you-go services for developers and higher-level managed services for other constituencies in the enterprise. Even solid VMware shops are testing out alternatives for different use cases, as we learned in last week’s big PayPal does/doesn’t dump VMware for OpenStack kerfuffle.

Fractious partner relationships

Second, VMware’s existing cloud partners — including big service providers and telcos offer VMware’s vCloud Director as an option but several of those partners, speaking privately, aren’t wild about it. They say it’s under-featured and expensive. And, nearly all of them offer other — less costly — options to vCloud Director including OpenStack.

The fact that VMware will pick certain service providers over others to host this cloud means it will tick off others.

“Nearly all of the service providers were already hedging on vCloud Director because of cost issues and now all those that weren’t already hedging are aggressively moving in that direction,” said an exec with one vCloud Director partner who requested anonymity for obvious reasons.

Forrester cloud analyst James Staten agreed that VMware stepped on “xSP” partner toes, but said it had no choice.  ”None of its partners — not even the vCloud Data Center partners —  were really offering the full vCloud Director cloud experience as VMware views it. And it felt it needed to do this to really help educate buyers on the full capabilities of vCloud Director,” he said via email.

Playing catchup is hard, especially for a leader

The bigger problem, is that VMware is behind the curve when it comes to full pay-as-you-go cloud capabilities. And the claim that customers running vSphere internally and vCloud Director in the cloud get fully interoperable elastic cloud services across sites,  is, untrue, said Carl Brooks,  internet infrastructure services analyst at The 451 Group.

“If you run vSphere in house and vCloud outside, you can get very basic capabilities — virtual storage and virtual servers– but that’s very little compared to what you get from any other hoster these days,” Brooks said. With vCloud director, “it’s like VMware is giving you a 1978 Pinto and saying it’s a Formula 1 car.”

VMware would argue that the level and type of services that a third party service provider offers depends on the service provider itself, not on VMware, which supplies the software stack and tools. That’s one big reason that VMware will manage and run this new hybrid cloud, but proof will be in the pudding.

And VMware’s biggest problem — the perception that its software is a proprietary and expensive — remains unchanged.

Banking on the brand

But, VMware has its advantages. For one thing, there are all those customers. If it can stem defections to OpenStack or other cloud technologies and convince enterprise customers that its cloud is a more secure but also cost competitive alternative to AWS, it has a shot. VMware also spun off a bunch of projects to the Pivotal Initiative so it can better focus on its priorities — although Pivotal is also focusing on cloud initiatives. It’s not clear — at least to me — how Pivotal’s work will or will not complement what VMware itself is doing with its hew hybrid public cloud.

The problem there is AWS has a 7-year head start and rolls out new services (and price cuts) practically every week. And it’s getting more enterprise savvy and is showing more interest in co-existence with private clouds preferred by regulation-constrained industries.

OpenStack remains a wild card. VMware CEO Pat Gelsinger was careful to talk about the company’s commitment to heterogeneous environments when he outlined the new strategy. And, after all, VMware is a member of OpenStack now, a development that caused a lot of head scratching.  One big reason for OpenStack momentum is that VMware’s rivals and enterprise customers alike have vested interest in preventing VMware from parlaying its on-site virtualization dominance into the cloud.

Staten maintains that VMware’s hybrid-public cloud is trying to be bold without being too bold. ”Any way you look at this, it seems like a half-hearted effort which means its likelihood of success is low,” Staten said.

Feature photo courtesy of Flickr user fontplaydotcom

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Microsoft is the latest cloud vendor to cut storage prices —  less than a week after Amazon and Google cut prices three times between them — those cuts conveniently timed for the AWS: Reinvent show.  Microsoft’s move, which takes effect December 12, cuts Azure storage prices by as much as 28 percent depending on volume, according to a blog post by Steve Martin, general manager of Windows Azure. The company last cut its storage prices 12 percent in March. With this latest cut, all three players are at the $0.095 mark for the first 1TB per month with some options and variability.

The new Microsoft price list:

And here’s the latest from Google, as of November 29. (DRA is a new Durable Reduced Availability storage option that lets users trade some data availability for lower price. Google positions it against Amazon’s reduced redundancy storage.)

And last but certainly not least, here’s the Amazon Web Services’ S3 status quo (also as of November 29.):

Crack analogy is wack

Tier 1 Research analyst Carl Brooks throws a bit of wet blanket on the crack analogy (thanks a lot, Carl)  saying that all this price posturing is more about marketing than actual market forces — that few enterprises will be swayed by these incremental changes. But even if it’s PR, news of the cuts — which get wide coverage — might get some companies to look at cloud storage as an option — especially for disaster recovery and backup.

On the other hand, Andres Rodriguez, CEO of Nasuni, a storage management service provider, loves all this action because he thinks it will boost cloud storage adoption.

“Cloud storage may be a commodity component but it is by far the stickiest part of the full cloud stack. Once you get companies like Dropbox to put their storage with you, they will be using lots of compute and bandwidth and even applications (analytics, etc) to go with it. Amazon, Microsoft and Google are using storage as their loss leader to get the rest of the value stack,” he said via email.

Netting it out

Nobody’s going to pick up and move their digital stuff from one cloud to another at every price cut, but new customers looking for storage in the sky might be intrigued by these offers. And once they check into a given cloud, these vendors all bet it’ll be hard to quit.

Tier 1′s Brooks thinks we’re not even close to the bottom when it comes to cloud storage pricing, so  stay tuned for more action from the big vendors.

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On the one hand, Microsoft has a vested interest in making Office ubiquitous — it is by far the dominant desktop productivity suite and is a cash cow for the company. On the other, Microsoft hopes to use Office to bolster its thus-far weak smartphone and tablet story. In that segment it wants to push Windows 8 as a strong competitor to Apple’s iOS and Android, and Office has always been the killer app (or apps) for Windows. Note: Microsoft has never officially acknowledged any Office-for-iPad or Android plans, and even denied such plans, but leaks have been fast and furious over the past few months. The conventional wisdom is that Microsoft ignores the iPad at its own peril and so must address it with Office in some form.

According to Friday’s TechTarget report:

Initially, Microsoft planned to introduce versions of Office 15 for all three platforms. But according to sources familiar with the company’s strategy, Microsoft will now ship the long-awaited application suite sometime in October for Windows devices, most notably the upcoming versions of Windows Phone, and hold off on selling Office for iOS and Android devices until next spring.

The debate over whether Microsoft should or should not field Office on the hot-selling iPad, shows the line Microsoft must tread. At a time when it’s trying to show Windows Azure as a more cross-platform cloud that will store and manage everyone’s data — regardless of the endpoints — the fact remains that the company sees Office as its cash cow and it also knows that it has a ton of ground to make up in mobile devices and smartphones where it will push Windows 8 and Windows Phone 8 hard against iOS and Android.

Withholding Office from iPad: Who gets hurt?

Tier 1 analyst Carl Brooks said this Windows first strategy is nutty in this day and age. “Microsoft wants to own user data in Office across the clients and in the cloud obviously. But this is a fight Apple’ s going to win on its own platform,” he said. “Microsoft can obviously deliver a better experience on Windows devices, but waiting too long or restricting Office to Windows would be suicide. I can already read .docs and .ppts on my iPhone and it gets easier all the time,” he said.

The better tack would be for Microsoft to give all mobile users a very cheap Office client and use that to woo them, he said. “If they think they can sell $100 Office licenses to iPad and tablet users, they’re bananas.”

There are also other third-party ways from IonGrid, OnLive and CloudOn to deliver Office to iPads.

David Linthicum, CTO and co-founder of Blue Mountain Labs, said by holding back on Office, Microsoft could hurt both its cloud and its Office story by giving people a reason to check out Google Docs or Zoho or another cloud-based productivity suite that competes with Office 365, Microsoft’s cloud-based Office implementation.

“This just shows Microsoft is up to its old tricks,” he said, “making sure that they  promote their platform in any way they can. However, not supporting popular devices could lead many enterprises to phase out Office and thus Windows. Many will opt for existing cloud-delivered Office productivity tools,” he said.

One thing is for sure, while Microsoft has a better tablet and smartphone story in its upcoming Windows 8, moves like this could handicap its overall cloud and applications strategy.

Feature photo courtesy of Flickr user Sean MacEntee

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OpenStack is still under development — the new Essex release debuted just last week — but several companies including Internap are running it in production. Commercial backers like HP, Dell, and Cisco are putting their resources and expertise into their own OpenStack implementations. (Citrix is — or was — also a backer: last week it set up CloudStack as an OpenStack competitor.)

HP says it is providing “hardened” OpenStack technology, for example, although exactly what that means is unclear. Last fall, HP said it was building a public cloud based on OpenStack, but today’s news is a broader endorsement of the technology. ”We are expanding OpenStack across our whole cloud portfolio,” Shane Pearson, VP of product marketing for HP Software, told me in an interview on Friday.

Meanwhile,  IBM and Red Hat — probably the two most notable OpenStack holdouts to this point — are expected to publicly disclose their OpenStack support this week or next at the OpenStack Spring Conference.

OpenStack as a weapon against AWS, VMware

Big IT companies like HP hope to use OpenStack to combat Amazon Web Services’ huge presence in the public cloud arena and to blunt VMware’s push to entrench its proprietary virtualization tool set — which already dominates in corporate data centers — as the de facto standard in cloud computing.

“It’s an interesting dance,” said Forrester Research VP and analyst James Staten. Companies like IBM and HP feel they ceded control to VMware in the data center and don’t want to repeat that mistake. “The cloud is the next game and they’re saying ‘we gave up control in the last round, we won’t do it this time,’” he said.

The endorsement of KVM as opposed to VMware ESX hypervisor is part of that plan. “It’s a good long-term bet that KVM/OpenStack will be the open alternative to VMware,” said GigaOM Pro analyst Jo Maitland.

According to an HP white paper, the new HP Compute Cloud service:

is built on OpenStack’s open source operating environment and enhanced with unique HP technology … HP Cloud Compute provides you with the software, control panels, and APIs required to run instances and manage your own compute cloud. In addition, HP Cloud Compute supports a variety of standard hardware configurations, and benefits from the KVM hypervisor technology.

Since OpenStack is still not completely baked, the “unique HP technology” mentioned is critical. What HP is announcing is that its “HP Converged Cloud”– an umbrella term for hybrid cloud — will amalgamate existing HP technology along with OpenStack in a way that will work across the private, public and hybrid clouds. It said Converged Cloud will be available May 10.

Legacy IT players face Amazon cloud threat

HP, like other tech giants, view Amazon’s growing dominance in the public cloud — and the fact that it is building stronger connections from corporate data centers into its cloud  – with growing alarm. But it’s hard for even companies as huge as HP and IBM to build out the type of infrastructure services Amazon provides and offer them at a profit.

“Building a public cloud and running that infrastructure the way Amazon does is impossible with the enterprise software model. You have to use these open source tools,” said Carl Brooks, analyst with Tier1 Research. “HP is trying to position itself as a company that can field all these services and do so profitably and to manage them all with its tools.”

Mixed cloud messages

It probably doesn’t help these legacy IT vendors build coherence around their strategy when they have have mixed cloud allegiances. For example, HP pledged two years ago to run Microsoft Windows Azure services in its data centers in an effort that has gone nowhere yet.

Pearson left that door open however. “HP has always had an open approach to infrastructure. We work with Azure today and will continue to work with it an other platforms that are not based on OpenStack,” he said.

These IT powers are trying to thread the needle between the Amazon public cloud threat on the one hand, and the specter of VMware’s proprietary cloud threat on the other.

Companies like HP want OpenStack to be Linux to VMware’s Microsoft, said Staten, a way to suck some of the cost out of the overall solution and to put price pressure on a formidable opponent. The problem is, right now the economics are uncertain.

Participating fully in the nascent OpenStack Foundation will not be free. In short, OpenStack may be open source and comparatively cheap compared to proprietary software, but it isn’t free. According to the OpenStack Fountation wiki, Platinum foundation members must pony up $500,000 per year and commit to three years.

“These companies have to make revenue and right now OpenStack doesn’t drive revenue,” Staten said. “They have to figure out if the amount of money will pay off on the other side.”

Photo courtesy of Flickr user marianodm

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In that arena it will square off with — you guessed it — Amazon Web Services, which last month cut its S3 storage prices and on Monday discounted Elastic Compute Cloud (EC2) services. Standard Google Cloud Storage now costs a tad less than Amazon S3 and Microsoft Windows Azure storage. Generally, the price of cloud storage is broken out into different per-GB fees for data stored, plus network charges for data flowing into and out of the cloud and the cost of certain requests.

Google also said it is partnering with five storage players – Panzura, Zmanda, StorSimple, TwinStrata and Gladinet — to make it easier for companies to push their data into the Google cloud. For example, StorSimple’s storage appliance — which already works with Azure — can now connect with Google Cloud Storage.

The full Google details are on its website, but the price for standard storage now starts at $0.12 per GB stored, down from $0.13 for up to 1 TB of total data. Updated:  Data transfer into the network is $0.21 per GB and Data transfer into the network is  free and out of the network is $0.12 per GB for up to 1 TB.  Standard Amazon S3 storage costs $1.25 $0.125 per GB for up to 1 TB of total storage per month.  for storing thumbnails, transcoded media, or other processed data that can be easily reproduced. (AWS reduced redundancy storage is less,  $0.093 per GB for up to the first TB.) AWS does not charge for data transfer into the cloud but does charge for transfer out, after the first gigabyte. Microsoft Windows Azure storage is also $0.125 per GB for up to 50 TB per month.

All these variables make it tricky to compare cloud storage.

Typically, “it’s not the storage that kills, it’s the network [fees],” said Carl Brooks, an analyst for the Tier1 Research division of The 451 Group. “Sure you can put a pantload of data in the cloud for $0.12/GB, but they charge you network fees to get it out again, and charge you a penny per 1000 transactions. A moderately popular website could do thousands of transactions per second, every second of the day. Great for archiving, less so for busy applications,” he said.

In addition to the paid options, new Google Cloud Storage users have a free trial quota good till June 30, 2012. It covers up to 5 GB of storage, 25 GB of download data for some regions and 25 GB of upload data.

There seems to be a real race to the bottom in cloud storage. For all the jockeying of these huge players, some feisty upstarts, including Spideroak, still boast even cheaper storage options, at least for archiving.

Photo courtesy of Flickr user stan

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