Joyent CEO Henry Wasik

San Francisco-based Joyent has made noises about going up against Amazon before  but now it’s more than tripled the number of instance types it will offer, including 7 different “standard” instance types with RAM allocations ranging from 0.5 to 128 GB; 5 high-memory instances; 6 high-CPU instances; 3 high-storage instances; and 3 high I/O instances (see chart.) But that’s just the beginning, said Joyent CEO Henry Wasik, who joined the company in November.

“We’ve completely reformatted what we do and dramatically expanded the number of instances — originally we had 10 and now 27, but once the portal is turned we’ll have 71,” said he said.

Depending on the workload, Joyent services may well be cheaper than AWS, he said. (Stay tuned for Amazon’s response.) But as many have pointed out, for cloud providers, competing on price alone is a fool’s errand.

Joyent seeks to differentiate itself on how well it runs high-performance applications on its own SmartOS (or on Linux or Windows);  the tooling it provides; its service and support; and its ability to offer the hybrid cloud option that many companies prefer.

Earlier this week Dell said it would offer Joyent as one of three public cloud options it will sell to customers. Dell had promised to deliver an OpenStack-based public cloud this year, but thought better of it.

Face it, in the cloud computing world, it’s Amazon first and then everyone else. In one of my favorite posts of the year comparing cloud providers to hamburger franchises, GigaOM’s Derrick Harris posited that AWS is McDonalds, Rackspace is Wendy’s but a handful of providers — Joyent, Virtustream, CloudSigma — represent the In-N-Out Burger (yum!) or Five Guys of cloud.  He wrote:

These cloud providers, like their analogous restaurant chains, are damn good at what they do and their patrons are loyal. They’re typically designed for maximum performance, maybe security, too, and will play around with new infrastructural or programming components in order to maintain their edge. They might even be the best at certain things and have some major customers (I’ve seen Maseratis leaving the In-N-Out drive-thru), but cost, geography or the desire to get a chicken sandwich, too, limit the number of users they can attract.

I know that we’re early on in cloud adoption and that the potential workloads moving to cloud is high. But to me it’s clear there will be a shakeout as enterprise players like VMware — which announced its public cloud option this week — along with Dell, IBM, HP and Red Hat try to preserve their traditional IT strengths in a cloud venue while newer look players  built for the cloud — Joyent, Virtustream, and others — gear up.

There may be a ton of work out there but i would bet that some of these players will not be standing in two years’ time.

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Nnamdi Orakwue, VP of Dell Cloud

The company’s first public cloud partners are Joyent, ScaleMatrix and ZeroLag. The rationale: Dell customers don’t want to be locked into a single cloud vendor and would like assurances that workloads can be moved as needed if their requirements change or their current cloud is not up to snuff. ZeroLag gives Dell a VMware-based cloud option.

There are two takeaways from the news, Nnamdi Orakwue, VP of Dell Cloud, said in an interview on Monday. “First, private cloud success is our bread and butter there our top priority on the open-source side is OpenStack. The second is multi-cloud management and helping our customers deal with it via Enstratius.” The Enstratius management offering supports more than 20 different clouds.

Orakwue acknowledged that Dell’s cloud strategy has been a work in progress. Late last year, the company said its public cloud would be based on OpenStack and would come out a year later than expected. Today’s news changes that.

Dell may add other cloud partners to the mix later and could take an equity stake in some of them. (GigaOM’s Derrick Harris wrote in 2011 that Joyent would be a smart investment for Dell if it’s serious about the cloud biz.)

On the one hand, Orakwue said Dell will be “platform agnostic,” on the other he said OpenStack is clearly its platform of choice on the private cloud side. You have to wonder if that’s a consolation prize for the OpenStack faithful.

Things are heating up on the public cloud front for sure. VMware is expected to re-announce its public cloud platform – which will run in as-yet-unnamed partner data centers — on Tuesday and the whole topic of public, private and hybrid cloud deployments will doubtless come up at GigaOM’s Structure event in San Francisco next month.

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The cloud technology providers are banking that these legacy players have tried to build their own cloud services and realized that it’s easier and more productive to base those services on a cloud expert’s technology. So they’re rolling out bundles and packages tailored for that constituency.

Case in point: On Wednesday Tier 3  announced the “Reseller Edition” of its Enterprise Cloud Services.  The Bellevue, Wash.-based company built its own management, controls and services atop VMware vSsphere and packaged all that up for third-party providers from VARs to  telcos.

And Thursday, Dell and OnApp announced joint offerings that are pre-tested to enable service providers, MSPs and telcos ro roll out cloud services as fast as possible.Last month, Rackspace pitched its own cloud infrastructure as a short cut for telcos, MSPS – the usual suspects — to build their own clouds.

Pivotal CEO Paul Maritz has repeatedly used wireless carriers as a key target market for the big data-oriented cloud platform his company is building.

So if carriers are gearing up to build clouds atop third-party IP, why is it happening now versus say, six or nine months ago? Tier 3 CEO Jared Wray thinks it’s because they see the market maturing. “Before recently it just wasn’t defined and there wasn’t a huge de facto open source initiative going on,” Wray said. Now, with OpenStack, in particular, that has happened.

“OpenStack has the fanfare and momentum, so the telcos see a defined, evolved ecosystem and it’s looking like they understand what the key components are,” Wray said. “The idea now is to use the colos and wires they already have and layer value added services atop all that.”

Wray attended last month’s OpenStack Summit to see for himself. As to whether Tier 3 will add OpenStack support he was noncommittal.

This is, of course, all very self-interested by these cloud providers to say. But there is evidence that hosting companies, data center providers and telcos really are getting pressure from their customers for the sorts of cloud services that come from Amazon Web Services and others, said Carl Brooks, cloud analyst at The 451 Group.

To be fair, not all the old line companies have given up on building their own technology for the cloud era. Thirty-year old MetaSwitch is open sourcing it’s new IMS core software to ease cloud development.

But whoever’s technology ends up in the mix, as raw connectivity and compute get ever more commoditized, the secret to profitability — and happy customers — is truly useful services and cloud seems the deployment model of choice.

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Terms were not disclosed but here’s how Dell described its new acquisition:

“Enstratius is available as software-as-a-service or as on-premise software that enables full control from within a customer’s data center, or via a hosted service … and complements the capability Dell recently acquired from Gale Technologies, now Active System Manager (ASM), by providing enhanced multi-cloud management and application configuration capabilities and integrates converged offerings with cloud systems management.”

For the past few years, Dell has plotted a tricky course as it tried to morph from a PC and server vendor to a provider of software, cloud and managed services. Toward that end it has bought companies ranging from Wyse and Boomi to bolster its cloud credibility and Quest Software for its data center management and automation tools. Like its rivals in traditional IT — companies including HP and IBM, Dell faces growing competition for enterprise and webscale workloads from Amazon Web Services. 

Update: As Dell rolled out its going-private game plan, GigaOM’s Derrick Harris counseled it to get serious about buying up real cloud expertise, which it apparently has.

Here’s how GigaOM described Enstratus (the company added the “i” a few months ago) in reporting the company’s $3.5 million Series A funding in 2011:

“EnStratus is similar to the more widely known RightScale service, although enStratus actually supports more clouds. It currently claims support for Amazon Web Services, AT&T Synaptic Storage, Bluelock, Cloud Central, Cloud.com, CloudSigma, EMC Atmos (e emc), Eucalyptus, Google Storage, GoGrid, Nimbula, OpenStack, Rackspace, Terremark, VMware vSphere, VMware vCloud Express and Windows Azure.”

Not surprisingly, George Reese, CTO of Minneapolis-based Enstratius, said Dell and his company align well. Enstratius runs a tight ship and has managed to stake a claim in enterprise cloud management with “just Series A financing,” Reese said via email.

Reese added that Dell:

“Sees cloud management as a key value point in the cloud computing stack. By acquiring us, they acquire established leadership in cloud management aimed at enterprise needs. Customers don’t want a single solution on a single stack, they want a solution that enables them to interact with many different cloud platforms, public and private. The Enstratius acquisition immediately gives Dell leadership in this area over other large technology vendors.”

Dell ownership gives Enstratius more resources to attack that market faster, he added.

At least one Wall Street analyst agreed (Dell is still trading until its restructuring is complete): Wells Fargo’s Maynard Um characterized the Enstratius buy as a good use of cash. In a research note, Um wrote:

“We believe the acquisition signals 1) management remains focused strategically on transforming the company and 2) from an industry perspective, the importance of being agnostic (though we expect tight integration with Dell’s owned-portfolio).”

This news comes just an hour or so after Quest competitor BMC announced plans to take itself private. Which just goes to show, if you don’t like the current IT landscape now, just wait a minute.

This story was updated at 8:47 a.m. PDT with more context about Dell’s cloud strategy  and Wells Fargo comments.

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Dell blazed the trail in February when it announced plans to take itself off the public market. That move, valued at $24.5 billion, was orchestrated by founder and CEO Michael Dell and Silver Lake Partners. Critics said the price undervalued the company which remains a power in PCs and servers, and is navigating a shift into cloud computing. In the mobile space, Alltel was ahead of the trend, taking itself private in 2007, and was  scooped up by Verizon two years later for $5.9 billion.

Citing unnamed sources, Reuters first reported Sunday that a BMC take-out by an investment group comprising Bain Capital and Golden Gate Partners was under discussion. BMC is not a household name for consumers but in business it’s a pretty big deal for enterprise IT and database admins.

BMC brands include Remedy service management software; BladeLogic automated configuration management; and Track-IT  help desk and asset management. These are the kinds of non-glam tools that keep a data center running.  Dell bought Quest Software, probably BMC’s most direct competitor, in deal that was completed in September 2012.

Who’s next?

Industry watchers said whatever happens with this proposed BMC deal, be prepared for more action. “There’s a seismic shift afoot with enterprise software vendors as they  move from traditional pricing and distribution models to OpEx, SaaS and cloud models. This means a financial disruption for many of them, not just BMC Software,” said Dana Gardner, principal analyst with Inter-Arbor Solutions and GigaOM PRO analyst.

To be sure, Dell and BMC are not alone: HP, IBM, Oracle and Microsoft are face withering heat from shareholders who expect the old profitability models to hold up even as the world of computing changes dramatically.  As an example, IBM last month stunned the market by missing on profit and revenue expectations for its first quarter. As Forbes reported:

“Revenues from cloud computing and analytics initiative continued to see growth in Q1. However, its core software business had a lackluster performance in the quarter and revenues were $5.6 billion, flat year-over-year (y-o-y) and up 1% in constant currency.”

Cloud upsets the apple cart

Cloud is the disrupting force here. As more companies evaluate the economics of putting workloads on massive webscale infrastructure —  outside their walls — they will buy far fewer servers and routers themselves. And as more corporate applications are delivered via software-as-a-service models there are fewer huge upfront software licensing deals. Instead payments are spread out across a year or three. There is also pressure on the massive enterprise service and maintenance fees favored by companies like Oracle.

“There’s a bet to be made,” Gardner said. “Does Wall Street understand such transitions, or does it throw the baby out with the bath water?”

It’s unlikely that giants like Oracle, IBM, Microsoft would go private, but never say never to a flock of smaller companies like BMC that may be sick of dealing with Wall Street pressures. For those smaller enterprise software (and hardware) companies, it may make sense to revert to private control and then re-emerge on the public markets when the coast is clear, or at least less rocky.

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 A RightScale survey released last week said  bigger companies — those with more than 1,000 employees — are “slightly more likely” to claim  cloud adoption than their smaller brethren: 77 percent of large companies surveyed said they’re adopting cloud in some form compared to 73 percent for smaller companies. The survey reinforced what RightScale CEO Michael Crandell says all the time: most companies want to use multiple clouds to avoid over-reliance on one provider.

Of course companies like RightScale and competitors like Enstratius and Server Density, which promise  a single dashboard for multiple clouds, have a vested interest in multi-cloud being the adoption mode of choice. So do most of the cloud providers who fear a world were Amazon Web Services will become the cloud standard.

Meanwhile, Amazon Web Services keeps chugging along. For Amazon’s first fiscal quarter, the business category including AWS, logged $750 million in net sales, down from $769 million from the historically strong fourth quarter, but still a pretty impressive number.

Mobile cloud access is hot hot hot

Not that it’s a surprise, but mobile is big. More people tap their cloud services with their tablets and smartphones instead of (or in addition to ) their PCs. that’s why Facebook bought Parse, the mobile backend as a service (MBaaS) provider.  And why AWS is bulking up its mobile development efforts. And also why Rackspace and Salesforce.com are building up their own mobile development portfolios.

All of that activity comes after Apigee’s acquisition of UserGrid, a pure-play MBaaS and Appcelerator’s buy of CocoaFish. It’ s clear that expertise in mobile development platforms is a huge draw right now.

The takeaway from this activity? Expect more “acqui-hires” by big companies of mobile back end services players.

What’s up with Dell cloud?

In January, Dell said it would hold off on its public OpenStack cloud until the fourth quarter and two week sago it announced a partnership with SUSE to build out its private OpenStack implementations. Under that pact,  Dell will package up SUSE’s OpenStack implementation on Dell hardware in a sort of easy-to-plug-in cloud appliance. In the background, the battle raging around Dell’s future ownership model has had to be a distraction. That may start easing up since Blackstone, which had been mulling its own bid, reportedly dropped those plans last week.

And, in a surprise appearance at the annual Silverlake Management conference in New York, company founder and CEO Michael Dell said IT security and cloud computing are key customer pushes for the company going forward — and  defended the much-maligned PC business in a world obsessed with smartphones, according to Bloomberg News. 

Mr. Dell is partnering with Silverlake to take his company private in a deal valued at about $24.4 billion when it was announced in January.  Some shareholders, including Southeastern Asset Management, which owns about 8.4 percent of Dell shares, and Carl Icahn characterized that as a sweetheart deal that undervalues the company.

There’ll be lots of cloud infrastructure talk, including on mobility, at Structure 2013 in San Francisco June 19-20. Please join us.

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That’s a nice vote of confidence from Dell; particularly as other Microsoft hardware partners don’t seem sold on Windows RT. Samsung, for example, decided not to offer its Windows RT slate in the U.S. and recently pulled the device from Germany, citing weak demand. Even Nvidia, which has a chip that powers Windows RT, has expressed disappointment in Windows RT sales. So why is Dell staying the course?

I suspect this another Dell attempt at relevancy in the mobile market. And it’s not the first. Dell had a line of Axim PDAs, offered smartphones and was actually developed a precursor to the big-screened phone with its 5-inch Dell Streak handset running Android.

But each of these products has come and gone, without Dell becoming a big player in mobile. And at this point, where else can Dell turn to maintain relevancy? It could offer another Android device but that’s a crowded market. It’s easier to take a bet on Windows RT becoming a success and standing out from today’s crowd.

Unfortunately, that’s not a smart bet. While I like the Windows RT hardware and experience in general, the same can be had with an Intel Atom tablet with similar weight and battery life. Plus, at roughly the same price point, users gain the full Windows 8 platform with legacy app support. Think of these as Windows 8 in a Windows RT form factor and price. Where’s the value add of Windows RT, given the situation?

Even worse: Intel suggests that future Windows 8 tablets could cost as little as $200, or about 40 percent of what they cost now. If Intel’s new Bay Trail chips help that happen, Windows RT won’t stand a chance unless devices that support it drop in price; as much as if not more than Windows 8 tablets. It’s always fun — and potentially profitable — to place a high-odds bet, but this time, I think Dell is backing the wrong horse.

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The goal of Project Moonshot, as initially stated in November 2011 and reiterated seven months later, is to offer super energy-efficient and compact servers capable of running the world’s biggest webscale (and biggest enterprise) workloads at a fraction of the cost of current hardware. HP said it shipped a number of early versions for customer proofs-of-concept last year but today’s news represents broad availability of what HP execs called a “software-defined server designed for the data center.”

The new server puts 4,500 Proliant servers into one HP 1500 enclosure. Compared to traditional Proliant (DL-380) servers, this iteration uses 89 percent less energy, 80 percent less space and is 97 percent less complex than the former state of the art at 77 percent less cost.

It’s understandable, given HP’s huge server installed base in enterprises, why it lays out that particular comparison, but customers might be more interested in how Moonshot boxes compare with webscale servers from what used to be no-name rivals like Quanta, Inventec, and Wistron. Increasingly, those are the servers that are being forklifted into massive data centers.  The notion of BYO servers is also spreading. In January, Rackspace, the big hosting and cloud provider, for example, said it would start building its own servers.

That trend puts traditional server vendors like HP, Dell and IBM in a tough spot. It’s good to see HP willing to cannibalize its existing products — if it doesn’t someone else will eat its lunch anyway. But,the macro issue is whether most of those big web-scale workloads have already moved onto new “no-name” servers or plan to do so. It is clear that for many of these new companies, the name on the box is not as important as the box itself and very few webscale customers appear willing to pay a premium for a label.

Moonshot servers are based on underlying fabric from HP networking, said Mark Potter, VP and GM of HP’s industry standard server (ISS)group. “This SDN switching is OpenFlow enabled so you can rapidly connect these computer architectures to any network,” he said during Monday’s web event. HP  is now running both 32- and 64-bit ARM-based Moonshot servers in the lab, he added.

Facebook outlined its wish list for webscale enclosures and servers which it pushed into the Open Compute Foundation. HP is part of that effort but it was unclear to me whether Moonshot servers will be fully Open Compute Project (OCP) compatible.

Update: Jim Ganthier, VP of marketing and operations in HP’s server group, confirmed that Moonshot is not OCP compatible but said the new servers would be great for powering similar webscale workloads.  He also took exception to the notion that HP server marketshare is being eroded by white box makers. Existing HP servers “power 8 out of 10 of the world’s most visited web sites and 3 out of 4 of the biggest social media sites,” he said. In addition, he said research like that from Gartner and IDC that shows branded servers — including HP boxes — losing ground to white box ODMs came out “before the world knew about Project Moonshot.”

So we’ll have to wait and see.

This report was updated at 9:19 a.m. PST with more detail on the servers and again at 12:55 p.m. PST with additional HP comment.

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Dubbed the X-Gene server on a chip, the product has been touted by Applied as the first 64-bit-capable ARM-based server in existence, the ideal part for webscale users (check out the pic of Facebook’s Frank Frankovsky holding one up) and also the future of Applied Micro. It’s the first chip to contain a software-defined network (SDN) controller on the die that will offer network services such as load balancing and ensuring service-level agreements on the chip. It’s like shoving the networking and computing vision of the Cisco Unified Computing System on a chip.

This is a big deal. Although the first generation won’t have enough bandwidth to eliminate the need for a switch at the top of a rack, the following generation will.

Paramesh Gopi, president and CEO of Applied Micro, said that these new chips have now made it past the prototype stage (the board in the picture uses an FPGA instead of a production silicon) AND are now in the hands of several customers, including Dell and Red Hat. Gopi expects physical servers containing the X-Gene to hit the market by the end of this year.

Gopi’s big bet

The chip is manufactured at 40 nanometers and contains eight 2.4 GHz ARM cores that Applied has designed, four smaller ARM Cortex A5 cores running the SDN controller software (the pink bit on the block diagram below), four 10-gigabit ethernet ports, and various ports that can support more Ethernet, SSDs, accelerator cards such as those from Fusion-io or SATA drives. In short, this a chip that combines networking and computing in one package.

When about asked about the power consumption of the chip, Gopi said it will run at 50 percent of the total cost of ownership of a comparable x86 product, but wouldn’t discuss actual power consumption.

“We’ll be able to run your LAMP stack and SQL jobs on Xeon-class ARM cores, and the routing protocols and such will be running on the Atom-class ARMs,” Gopi said. “It’s the fundamentals of a rack on a single chip.”

Building this chip has taken four years. It required Gopi to visit ARM at its U.K. headquarters to convince them to give him an architecture license to build a chip for servers. In an interview with me at the Open Compute Summit in January, Gopi explained that he saw the flexibility and the architecture that ARM offered could become an asset for webscale computing, so he embarked on turning Applied Micro, a public company with a few hundred million in revenue, into a startup.

Like others, such as Barry Evans of Calxeda or Andrew Feldman of Sea Micro, he saw that power issues were raising the cost of operating data centers — and cutting into the bottom line at web businesses — and he thought he had a solution. His solution was to get an architectural license from ARM, so he could make a 64-bit-capable chip ahead of ARM’s plans to introduce that powerful a core. ARM introduced that core last year, and vendors of ARM-based server chips such as AMD and Calxeda expect to have 64-bit-capable chips next year. But Applied is shipping those machines today.

“We’ll end this wimpy core vs. brawny core debate once and for all,” Gopi said.

The new hardware mindset

Applied Micro CEO Paramesh Gopi.

The mobile industry has relied upon the common ARM architecture to build a wide variety of chips that give each vendor a slightly different set of features. Both Nvidia and Qualcomm start with ARM cores (hell, even Apple has an ARM architectural license) to build their application processors. This lowers the cost of designing chips, because engineers can start from a higher level when solving problems.

And the modularity of the ARM cores combined with an architecture license also means firms can customize their designs for a certain market without spending a huge amount of time or dollars. Gopi will actually address some of this at our Structure event June 19 and 20, in a presentation on designing hardware at the speed of software.

For Applied, this dynamic plays out in the existence of a new type of chip for the data center, but also in the fact that in nine or 12 months Applied plans to test the second-generation X-Gene chip, one that will support 100-Gigabit Ethernet and will obviate the need for a top-of-rack switch. Ironically, this architecture probably won’t be a welcome development for Applied’s existing networking clients like Cisco and Juniper.

But it’s clearly the direction that large webscale customers want to go. And the second-generation architecture is also important for the first-generation X-Gene products, because without it, Applied may not have a chance at getting technically savvy and forward-looking potential customers that need not just a single interesting product, but a real understanding of the roadmap before they commit to a new architecture.

So even as Applied ships these first products to customers for use in devices that hit the market at the end of this year, it’s already developing its production of the next generation 28-nanometer versions of the heavy-duty ARM cores and 100-Gigabit-capable networking while prepping for later versions that may include photonics and other elements that data center customers are already discussing as tomorrow’s technology.

It took a bold vision — and that trip to ARM — for Gopi to get Applied Micro to the table as these discussions about the next generation data center are playing out. But with this design, it has earned a seat. Now all it has to do is earn the business.

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In a research note UBS analyst Steven Milunovich wrote:

“Mr. Dell and Silver Lake intend to pursue a more aggressive PC/tablet strategy and invest significantly in the enterprise segment. Consequently, earnings could be weak for two or more years, which would not please the public market.”

The Dell proxy lays out a raft of problems besetting the company including a “deteriorating outlook for the PC market” due  in part to the cannibalization of PC sales by smartphones and tablets. It also mentioned a faster-than-expected decline of PC sales into emerging markets, uncertainties around Windows 8 adoption and slower Windows 7 upgrades. As a result of all that, Milunovich is reducing his earnings estimate for Dell’s 2014 fiscal year from $1.70 to $1.30 and cut his estimate for the following year to $1.12.

The Boston Consulting Group, according to the proxy, warned Dell management of a shift to cheaper products and services in its “end user computing” (EUC) business. BCG concluded that “as a result of a likely persistent decline in the premium segment of the EUC business, unless [Dell] changed its strategy to become more competitive in the lower-margin segment… [it] would require years of aggressive restructuring in order to maintain its value, and would face the risk that its decreasing scale would render it less competitive.”

BCG said Dell’s Enterprise Solution and Services (ESS) business also to invest in research and development and hire a bigger sales force. As we all know R&D and enterprise sales folks are pricey. All Things Digital has more on the proxy’s depressing take.

DELL data by YCharts

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