HP buys Eucalyptus as cloud consolidation commences for real

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Hewlett-Packard, which is basing its cloud strategy on OpenStack, has decided to buy Eucalyptus, a backer of a rival open-source cloud technology. And Eucalyptus CEO Marten Mickos, will lead the company’s cloud effort as SVP and general manager of HP’s cloud Business.

Martin Fink, who had filled that role, will remain CTO and director of HP Labs. Terms of the deal were not disclosed, but Eucalyptus had raked in something like $55 million in venture funding since it was founded in 2010. Some estimate that HP may have paid up to $100 million for Eucalyptus, its IP and some 70 employees.

In an interview, the executives didn’t provide much detail about integration plans, but stressed that [company]Eucalyptus[/company] brings valuable experience in deploying private clouds that interoperate with [company]Amazon Web Services[/company] to HP and that those AWS “use patterns” will come in handy as [company]HP[/company] continues to push its OpenStack-based private, public and hybrid cloud vision into enterprise accounts.

All eyes on the enterprise cloud prize

HP wants to be seen as having the broadest set of cloud deployment options for enterprise accounts. But that’s a hotly contested demographic, where it must contend with [company]Red Hat[/company] and [company]IBM[/company] on the OpenStack side of the spectrum and [company]VMware[/company] and [company]Microsoft[/company] on the proprietary cloud side.

Bill Hilf, SVP of product and service management for HP Cloud, summed it up:

Our strategy is really not to say we’ll only have public or private offerings and we believe the lines between all those continue to blur and at least for enterprise workloads, most of them over next few years will be on-prem clouds or hosted private clouds. That’s the sweet spot we target and Eucalyptus brings with it not just AWS interop but general skills in that market. OpenStack continues to be our core platform and along with that what we’re doing with Cloud Foundry at the dev/PaaS layer and with AWS interoperability, we’ll be the only vendor with that breadth of choice along with hardware, software and services around that to help customers build their clouds.

Over the past year, Fink said HP has become “the number one OpenStack contributor” — a claim Red Hat would probably dispute. HP is “committed to open source and the open cloud promise and bringing Eucalyptus on board that remains the same,” he noted.

Mickos was once a pretty harsh critic of OpenStack, which shows promise but remains a work in progress comprising many sub-projects and modules that someone needs to put together. At Structure 2012, he likened it to the “Soviet Union of cloud” because it had so many corporate backers nothing ever seemed to get accomplished.

Marten Mickos, SVP and GM of HP Cloud business.

Marten Mickos, SVP and GM of HP Cloud business.

But in recent months he’s been more conciliatory. At Structure this year, Mickos, then-Citrix exec Sameer Dholakia (representing CloudStack), and Nebula CTO Chris Kemp (standing in for OpenStack), mutually agreed that open-source cloud coexistence was preferable to sniping. Then in August, Mickos agreed to speak at an OpenStack event, which got the spidey senses tingling.

As a dozen or more OpenStack cloud vendors jockey for position, they’re all looking for ways to assure business accounts that OpenStack can be deployed without massive headaches. [company]Nebula[/company] offers a plug-in OpenStack appliance, Metacloud will deploy and manage your OpenStack for you. Red Hat hired a Gartner analyst who blogged about why vendors can’t sell OpenStack to enterprises to (get this) help Red Hat sell OpenStack to enterprises. And now HP has brought Eucalyptus, and its management, in house.

This isn’t the first time Mickos has sold an open-source-oriented company to a giant. He was CEO of MySQL when Sun Microsystems bought that company for $1 billion in 2008. As noted above, the terms of the [company]Eucalyptus[/company] deal were not disclosed but they’re nowhere near that.

Eucalyptus claims a couple big customers — FSecure and Nokia for example — and Mickos recently claimed a big turnaround, but I don’t see that much traction. And it looks like Nokia is upping its reliance on OpenStack via a new Red Hat deal.  For whatever reason, OpenStack seems to have won the marketing war for open source cloud.

More cloud consolidation coming?

With Eucalyptus now part of [company]HP[/company], you have to wonder about the fate of the other smallish open-source cloud companies going forward. It’s not apparent how many of these smaller independents will survive on their own with Red Hat, HP, [company]IBM[/company] sucking the air out of the room on the OpenStack side and [company]Microsoft[/company], [company]VMware[/company] et al. trying to woo enterprise customers with their own clouds. And don’t forget the whole AWS enterprise attack. [company]Google[/company][company] is also targeting enterprise accounts for Google Cloud Platform — it just hired former Red Hat CTO Brian Stevens to lead that effort. All of that action leaves companies like Mirantis, Cloudscaling, even OpenStack daddy Rackspace in an uncomfortable spot. Let the games begin.

For more on the deal check out this week’s Structure Show podcast with Martin Fink, Mårten Mickos, and Bill Hilf.

Aaannd, here’s a video of Mickos, Dholakia, and Kemp closing out Structure 2014.

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Tim Wessels

Well, this is undoubtedly a fortuitous turn of events for Eucalyptus, whose major appeal was its close integration with AWS in a hybrid private-to-public cloud model. Eucalyptus started as an academic project at UC Santa Barbara and was later commercialized and sort-of open sourced. Mr. Mickos raised the profile of Eucalyptus after he came on board and it was likely that he was also looking to do an acquisition of Eucalyptus down the road. What HP gets out of the deal is Mr. Mickos and Eucalyptus with is 2012 agreement with AWS for API support and integration with Eucalyptus but where this fits with HP’s overall cloud computing strategy is a bit cloudy. HP along with IBM are in the middle tier of cloud service providers. They aren’t big enough to challenge AWS, Google and Microsoft but they have decades of experience working with enterprise customers and a lot of credibility with them. Like IBM’s acquisition of SoftLayer, HP’s acquisition of Eucalyptus is a way to diversify their OpenStack position by having other alternatives to deliver to their customers.

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