Weekly Update

Mo’ Money: Life is Good for Cloud Vendors

Put simply, life is good for cloud-computing and big-data vendors because there’s plenty of money to be made. Whether it’s from VCs, big-IT suitors or (gasp) customers, someone wants to invest in your vision. The great part is that you don’t even have to be a startup; if you have a good product, you can get paid. Want evidence? This week offered plenty.

Investors Reach into Their Pockets …

From a sheer numbers perspective, the biggest winner has to be Virtustream, which just closed a $40 million first round. The Washington, D.C.-based company (with a strong presence in Great Britain) has been selling outsourced hosting services out of its own data centers for years, and now it’s trying to bridge the gap between corporate data centers and its own via its xStream cloud management platform.

Platform software paid off for Cloud.com (formerly VMOps), too. The startup raised $11 million in its Series B round for its CloudStack solution, which helps providers and individual companies turn their existing virtualized data centers into private clouds. I liked the old moniker better (“Cloud.com” somehow cheapens the company’s image, if you ask me), but its stockpile of cash and open-source approach likely will speak louder than its name.

Big-data startup Clustrix proved the importance of cloudscale data management, presenting itself to the world on the heels of $18 million in initial funding. Clustrix’s idea is to bridge the gap between RDBMS functionality and NoSQL scalability via a scale-out, proprietary-software-based appliance. Open-source database projects like Cassandra and HBase (which just graduated to Apache Incubator status) are popular among web types, but this is the type of solution that could convince some of them to give up their DIY database cultures.

As Do Big Vendors …

And then there are the acquisitions. IBM’s purchase of Cast Iron Systems has been covered to death, but the technical gist is that the Cast Iron platform will help customers integrate on-premise and cloud-based data, making SaaS migration more palatable (and letting IBM keep their business through this transition). Indeed, Cast Iron is just the latest in a rash of cloud startups finding their way into large IT vendors’ operations as they prepare to push cloud computing to enterprises.

GemStone Systems – which came into being in 1982 – wasn’t build with cloud computing in mind, its future is in the cloud thanks to VMware. New VMware property SpringSource bought GemStone to ensure customers’ data layers can scale alongside the CPU layer as application demand increases. GemStone works fine on-premise and will be integrated with several SpringSource products, but SpringSource GM Rod Johnson told me it likely will be offered as a service in future VMware PaaS efforts, and probably baked into the core functionality of some platforms.

As Do Customers …

Need more proof that life is good in the cloud? How about Rackspace’s first-quarter earnings call, during which it touted considerable cloud growth? The Rackspace Cloud represents only a fraction of total revenues (although it’s still growing), but more than 80 percent of the company’s nearly 100,000 customers. I’d love to know how this stacks up against Amazon Web Services, but 80,000 paying cloud customers is impressive either way. Yes, Rackspace probably wants to see a higher revenue-to-customer ratio, but that should come if, as I suspect, many of its early cloud customers still are in the experimental stage.

Some believe cloud computing has dot-com-like bubble potential, but I’ve grown tired of the Chicken Little routine. Rackspace’s customer count is no mirage, and I don’t believe vendors like IBM, CA and VMware are investing so heavily into a model for which they don’t foresee high ROI. Some cloud startups will fail, no doubt, but unlike so many dot-coms, cloud companies have real products that will find their way into other vendors’ portfolios and make money for someone.

Question of the week

Is cloud computing a bubble? If so, which startups will thrive and which will fail?