Dec
11
2018
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Dell’s long game is in hybrid and private clouds

When Dell voted to buy back the VMware tracking stock and go public again this morning, you had to be wondering what exactly the strategy was behind these moves. While it’s clearly about gaining financial flexibility, the $67 billion EMC deal has always been about setting up the company for a hybrid and private cloud future.

The hybrid cloud involves managing workloads on premises and in the cloud, while private clouds are ones that companies run themselves, either in their own data centers or on dedicated hardware in the public cloud.

Patrick Moorhead, founder and principal analyst at Moor Insight & Strategy, says this approach takes a longer investment timeline, and that required the changes we saw this morning. “I believe Dell Technologies can better invest in its hybrid world with longer-term investors as the investment will be longer term, at least five years,” he said. Part of that, he said, is due to the fact that many more on-prem to public connectors services need to be built.

Dell could be the company that helps build some of those missing pieces. It has always been at its heart a hardware company, and as such either of these approaches could play to its strengths. When the company paid $67 billion for EMC in 2016, it had to have a long-term plan in mind. Michael Dell’s parents didn’t raise no fool, and he saw an opportunity with that move to push his company in a new direction.

It was probably never about EMC’s core storage offerings, although a storage component was an essential ingredient in this vision. Dell and his investor’s eyes probably were more focused on other pieces inside the federation — the loosely coupled set of companies inside the broader EMC Corporation.

The VMware bridge

The crown jewel in that group was of course VMware, the company that introduced the enterprise to server virtualization. Today, it has taken residency in the hybrid world between the on-premises data center and the cloud. Armed with broad agreements with AWS, VMware finagled its way to be a key bridge between on prem and the monstrously popular Amazon cloud. IT pros used to working with VMware would certainly be comfortable using it as a cloud control panel as they shifted their workloads to AWS cloud virtual machines.

In fact, speaking at a press conference at AWS re:Invent earlier this month, AWS CEO Andy Jassy said the partnership with VMware has been really transformational for his company on a lot of different levels. “Most of the world is virtualized on top of VMware and VMware is at the core of most enterprises. When you start trying to solve people’s problems between being on premises and in the cloud, having the partnership we have with VMware allows us to find ways for customers to use the tools they’ve been using and be able to use them on top of our platform the way they want,” Jassy told the press conference.

The two companies also announced an extension of the partnership with the new AWS Outposts servers, which bring the AWS cloud on prem where customers can choose between using VMware or AWS to manage the workloads, whether they live in the cloud or on premises. It’s unclear whether AWS will extend this to other companies’ hardware, but if they do you can be sure Dell would want to be a part of that.

Pivotal’s key role

But it’s not just VMware that Dell had its sights on when it bought EMC, it was Pivotal too. This is another company, much like VMware, that is publicly traded and operates independently of Dell, even while living inside the Dell family of products. While VMware handles managing the server side of the house, Pivotal is about building software products.

When the company went public earlier this year, CEO Rob Mee told TechCrunch that Dell recognizes that Pivotal works better as an independent entity. “From the time Dell acquired EMC, Michael was clear with me: You run the company. I’m just here to help. Dell is our largest shareholder, but we run independently. There have been opportunities to test that [since the acquisition] and it has held true,” Mee said at the time.

Virtustream could also be a key piece providing a link to run traditional enterprise applications on multi-tenant clouds. EMC bought this company in 2015 for $1.2 billion, then later spun it out as a jointly owned venture of EMC and VMware later that year. The company provides another link between applications like SAP that once only ran on prem.

Surely it had to take all the pieces to get the ones it wanted most. It might have been a big price to pay for transformation, especially since you could argue that some of the pieces were probably past their freshness dates (although even older products bring with them plenty of legacy licensing and maintenance revenue).

Even though the long-term trend is shifting toward moving to the cloud, there will be workloads that stay on premises for some time to come. It seems that Dell is trying to position itself as the hybrid/private cloud vendor and all that entails to serve those who won’t be all cloud, all the time. Whether this strategy will work long term remains to be seen, but Dell appears to be betting the house on this approach, and today’s moves only solidified that.

Dec
07
2018
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Pivotal announces new serverless framework

Pivotal has always been about making open-source tools for enterprise developers, but surprisingly, up until now, the arsenal has lacked a serverless component. That changed today with the alpha launch of Pivotal Function Service.

Pivotal Function Service is a Kubernetes-based, multi-cloud function service. It’s part of the broader Pivotal vision of offering you a single platform for all your workloads on any cloud,” the company wrote in a blog post announcing the new service.

What’s interesting about Pivotal’s flavor of serverless, besides the fact that it’s based on open source, is that it has been designed to work both on-prem and in the cloud in a cloud native fashion, hence the Kubernetes-based aspect of it. This is unusual to say the least.

The idea up until now has been that the large-scale cloud providers like Amazon, Google and Microsoft could dial up whatever infrastructure your functions require, then dial them down when you’re finished without you ever having to think about the underlying infrastructure. The cloud provider deals with whatever compute, storage and memory you need to run the function, and no more.

Pivotal wants to take that same idea and make it available in the cloud across any cloud service. It also wants to make it available on-prem, which may seem curious at first, but Pivotal’s Onsi Fakhouri says customers want that same abilities both on-prem and in the cloud. “One of the key values that you often hear about serverless is that it will run down to zero and there is less utilization, but at the same time there are customers who want to explore and embrace the serverless programming paradigm on-prem,” Fakhouri said. Of course, then it is up to IT to ensure that there are sufficient resources to meet the demands of the serverless programs.

The new package includes several key components for developers, including an environment for building, deploying and managing your functions, a native eventing ability that provides a way to build rich event triggers to call whatever functionality you require and the ability to do this within a Kubernetes-based environment. This is particularly important as companies embrace a hybrid use case to manage the events across on-prem and cloud in a seamless way.

One of the advantages of Pivotal’s approach is that Pivotal can work on any cloud as an open product. This is in contrast to the cloud providers like Amazon, Google and Microsoft, which provide similar services that run exclusively on their clouds. Pivotal is not the first to build an open-source Function as a Service, but they are attempting to package it in a way that makes it easier to use.

Serverless doesn’t actually mean there are no underlying servers. Instead, it means that developers don’t have to point to any servers because the cloud provider takes care of whatever infrastructure is required. In an on-prem scenario, IT has to make those resources available.

Nov
28
2018
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AWS is bringing the cloud on prem with Outposts

AWS has always been the pure cloud vendor, and even though it has given a nod to hybrid, it is now fully embracing it. Today in conjunction with VMware, it announced a pair of options to bring AWS into the data center.

Yes, you read it correctly. You can now put AWS into your data center with AWS hardware, the same design they use in their own data centers. The two new products are part of AWS Outposts.

There are two Outposts variations — VMware Cloud on AWS Outposts and AWS Outposts. The first uses the VMware control panel. The second allows customers to run compute and storage on premises using the same AWS APIs that are used in the AWS cloud.

In fact, VMware CEO Pat  Gelsinger joined AWS CEO Andy Jassy onstage at AWS re:Invent for a joint announcement. The two companies have been working together for some time to bring VMware to the AWS cloud. Part of this announcement flips that on its head, bringing the AWS cloud on prem to work with VMware. In both cases, AWS sells you their hardware, installs it if you wish, and will even maintain it for you.

This is an area that AWS has lagged, preferring the vision of a cloud, rather than moving back to the data center, but it’s a tacit acknowledgment that customers want to operate in both places for the foreseeable future.

The announcement also extends the company’s cloud-native-like vision. On Monday, the company announced Transit Gateways, which is designed to provide a single way to manage network resources, whether they live in the cloud or on prem.

Now AWS is bringing its cloud on prem, something that Microsoft, Canonical, Oracle and others have had for some time. It’s worth noting that today’s announcement is a public preview. The actual release is expected in the second half of next year.

more AWS re:Invent 2018 coverage

Nov
12
2018
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Vista snaps up Apptio for $1.94B, as enterprise companies remain hot

It seems that Sunday has become a popular day to announce large deals involving enterprise companies. IBM announced the $34 billion Red Hat deal two weeks ago. SAP announced its intent to buy Qualtrics for $8 billion last night, and Vista Equity Partners got into the act too, announcing a deal to buy Apptio for $1.94 billion, representing a 53 percent premium for stockholders.

Vista paid $38 per share for Apptio, a Seattle company that helps companies manage and understand their cloud spending inside a hybrid IT environment that has assets on-prem and in the cloud. The company was founded in 2007 right as the cloud was beginning to take off, and grew as the cloud did. It recognized that companies would have trouble understanding their cloud assets along side on-prem ones. It turned out to be a company in the right place at the right time with the right idea.

Investors like Andreessen Horowitz, Greylock and Madrona certainly liked the concept, showering the company with $261 million before it went public in 2016. The stock price has been up and down since, peaking in August at $41.23 a share before dropping down to $24.85 on Friday. The $38 a share Vista paid comes close to the high water mark for the stock.

Stock Chart: Google

Sunny Gupta, co-founder and CEO at Apptio liked the idea of giving his shareholders a good return while providing a good landing spot to take his company private. Vista has a reputation for continuing to invest in the companies it acquires and that prospect clearly excited him. “Vista’s investment and deep expertise in growing world-class SaaS businesses and the flexibility we will have as a private company will help us accelerate our growth…,” Gupta said in a statement.

The deal was approved by Apptio’s board of directors, which will recommend shareholders accept it. With such a high premium, it’s hard to imagine them turning it down. If it passes all of the regulatory hurdles, the acquisition is expected to close in Q1 2019.

It’s worth noting that the company has a 30-day “go shop” provision, which would allow it to look for a better price. Given how hot the enterprise market is right now and how popular hybrid cloud tools are, it is possible it could find another buyer, but it could be hard to find one willing to pay such a high premium.

Vista clearly likes to buy enterprise tech companies having snagged Ping Identity for $600 million and Marketo for $1.8 billion in 2016. It grabbed Jamf, an Apple enterprise device management company and Datto, a disaster recovery company last year. It turned Marketo around for $4.75 billion in a deal with Adobe just two months ago.

Oct
30
2018
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The hybrid cloud market just got a heck of a lot more compelling

Let’s start with a basic premise that the vast majority of the world’s workloads remain in private data centers. Cloud infrastructure vendors are working hard to shift those workloads, but technology always moves a lot slower than we think. That is the lens through which many cloud companies operate.

The idea that you operate both on prem and in the cloud with multiple vendors is the whole idea behind the notion of the hybrid cloud. It’s where companies like Microsoft, IBM, Dell and Oracle are placing their bets. These died-in-the-wool enterprise companies see their large customers making a slower slog to the cloud than you would imagine, and they want to provide them with the tools and technologies to manage across both worlds, while helping them shift when they are ready.

Cloud-native computing developed in part to provide a single management fabric across on prem and cloud, freeing IT from having two sets of tools and trying somehow to bridge the gap between the two worlds.

What every cloud vendor wants

Red Hat — you know, that company that was sold to IBM for $34 billion this week — has operated in this world. While most people think of the company as the one responsible for bringing Linux to the enterprise, over the last several years, it has been helping customers manage this transition and build applications that could live partly on prem and partly in the cloud.

As an example, it has built OpenShift, its version of Kubernetes. As CEO Jim Whitehurst told me last year, “Our hottest product is OpenShift. People talk about containers and they forget it’s a feature of Linux,” he said. That is an operating system that Red Hat knows a thing or two about.

With Red Hat in the fold, IBM can contend that being open source; they can build modern applications on top of open source tools and run them on IBM’s cloud or any of their competitors, a real hybrid approach.

Microsoft has a huge advantage here, of course, because it has a massive presence in the enterprise already. Many companies out there could be described as Microsoft shops, and for those companies moving from on prem Microsoft to cloud Microsoft represents a less daunting challenge than starting from scratch.

Oracle brings similar value with its core database products. Companies using Oracle databases — just about everyone — might find it easier to move that valuable data to Oracle’s cloud, although the numbers don’t suggest that’s necessarily happening (and Oracle has stopped breaking out its cloud revenue).

Dell, which spent $67 billion for EMC, making the Red Hat purchase pale by comparison, has been trying to pull together a hybrid solution by combining VMware, Pivotal and Dell/EMC hardware.

Cloud vendors reporting

You could argue that hybrid is a temporary state, that at some point, the vast majority of workloads will eventually be running in the cloud and the hybrid business as we know it today will continually shrink over time. We are certainly seeing cloud infrastructure revenue skyrocketing with no signs of slowing down as more workloads move to the cloud.

In their latest earnings reports, those who break out such things, the successful ones, reported growth in their cloud business. It’s important to note that these companies define cloud revenue in different ways, but you can see the trend is definitely up:

  • AWS reported revenue of $6.7 billion in revenue for the quarter, up from $4.58 billion the previous year.
  • Microsoft Intelligent Cloud, which incorporates things like Azure and server products and enterprise services, was at $8.6 billion, up from $6.9 billion.
  • IBM Technology Services and Cloud Platforms, which includes infrastructure services, technical support services and integration software reported revenue of $8.6 billion, up from $8.5 billion the previous year.
  • Others like Oracle and Google didn’t break out their cloud revenue.

Show me the money

All of this is to say, there is a lot of money on the table here and companies are moving more workloads at an increasingly rapid pace.  You might also have noticed that IBM’s growth is flat compared to the others. Yesterday in a call with analysts and press, IBM CEO Ginni Rometty projected that revenue for the hybrid cloud (however you define that) could reach $1 trillion by 2020. Whether that number is exaggerated or not, there is clearly a significant amount of business here, and IBM might see it as a way out of its revenue problems, especially if they can leverage consulting/services along with it.

There is probably so much business that there is room for more than one winner, but if you asked before Sunday if IBM had a shot in this mix against its formidable competitors, especially those born in the cloud like AWS and Google, most probably wouldn’t have given them much chance.

When Red Hat eventually joins forces with IBM, it at least gives their sales teams a compelling argument, one that could get them into the conversation — and that is probably why they were willing to spend so much money to get it. It puts them back in the game, and after years of struggling, that is something. And in the process, it has stirred up the hybrid cloud market in a way we didn’t see coming last week before this deal.

Oct
29
2018
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IBM is betting the farm on Red Hat — and it better not mess up

Who expects a $34 billion deal involving two enterprise powerhouses to drop on a Sunday afternoon, but IBM and Red Hat surprised us yesterday when they pulled the trigger on a historically large deal.

IBM has been a poster child for a company moving through a painful transformation. As Box CEO (and IBM business partner) Aaron Levie put it on Twitter, sometimes a company has to make a bold move to push that kind of initiative forward:

They believe they can take their complex mix of infrastructure/software/platform services and emerging technologies like artificial intelligence, blockchain and analytics, and blend all of that with Red Hat’s profitable fusion of enterprise open source tools, cloud native, hybrid cloud and a keen understanding of the enterprise.

As Jon Shieber pointed out yesterday, it was a tacit acknowledgement that company was not going to get the results it was hoping for with emerging technologies like Watson artificial intelligence. It needed something that translated more directly into sales.

Red Hat can be that enterprise sales engine. It already is a company on a $3 billion revenue run rate, and it has a goal of hitting $5 billion. While that’s somewhat small potatoes for a company like IBM that generates $19 billion a quarter, it represents a crucial addition.

That’s because in spite of its iffy earnings reports over the last five years, Synergy Research reported that IBM had 7 percent of the cloud infrastructure market in its most recent report, which it defines as Infrastructure as a Service, Platform as a Service and hosted private cloud. It is the latter that IBM is particularly good at.

The company has the pieces in place now and a decent amount of marketshare, but Red Hat gives it a much more solid hybrid cloud story to tell. They can potentially bridge that hosted private cloud business with their own public cloud (and presumably even those of their competitors) and use Red Hat as a cloud native and open source springboard, giving their sales teams a solid story to tell.

IBM already has a lot of enterprise credibility on its own, of course. It sells on top of many of the same open source tools as Red Hat, but it hasn’t been getting the sales and revenue momentum that Red Hat has enjoyed. If you combine the enormous IBM sales engine and their services business with that of Red Hat, you have the potential to crank this into a huge business.

Photo: Ron Mller

It’s worth noting that the deal needs to pass shareholder muster and clear global regulatory hurdles before they can combine the two organizations. IBM has predicted that it will take at least until the second half of next year to close this deal and it could take even longer.

IBM has to use that time wisely and well to make sure when they pull the trigger, these two companies blend as smoothly as possible across technology and culture. It’s never easy to make these mega deals work with so much money and pressure involved, but it is imperative that Big Blue not screw this up. This could very well represent its last best chance to right the ship once and for all.

Sep
13
2018
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Hybrid cloud data specialist Datrium nabs $60M led by Samsung at a $282M valuation

Cloud services — where our data, apps and computing power are all being managed in servers owned by others, many miles from where we are sitting — have taken off like a rocket in the decade with the rise of smaller devices, but in the business world, hybrid solutions — mixing cloud with on-premise architectures — remains the order of the day. And today, a provider of hybrid cloud services has raised a round of funding to capitalise on that. Datrium, a provider of back-up and other services for businesses that store and use data in hybrid environments, has raised $60 million in a Series D round of funding.

The company is not disclosing its valuation — we’re asking — but PitchBook estimates that it was at $222 million pre-money, putting it at $282 million post-money. This was an upround compared to previous raises, but it’s also playing on a more modest field than some of its competitors. As a point of comparison, another notable hybrid cloud back-up and data management startup, Rubrik, raised $180 million at a $1.3 billion valuation last year.

Interestingly, Datrium and Rubrik share an investor. This latest round was led by Samsung’s Catalyst Fund, with Icon Ventures, NEA and Lightspeed Venture Partners also participating. Lightspeed (whose investing partner founded and leads Rubrik) also backs Rubrik.

Large enterprises are gradually making the move to the cloud, but they are doing so while also continuing to use their legacy services and architectures — in part to continue sweating those assets, and in part because if something isn’t broken, it’s tempting fate to try to fix it. As a result of that, hybrid cloud services have been a big business up to now, with estimates that it will be a $44.6 billion market this year, and growing to $97.6 billion by 2023.

“As a world leader in memory and storage technologies, we’re always looking for novel and innovative ways to advance datacenter technology,” said Shankar Chandran, senior vice president and managing director, Samsung Catalyst Fund, in a statement. “At this unique moment in time—when data is powering the economy—cutting-edge infrastructure, like Datrium’s hybrid cloud platform, will help enterprises overcome major obstacles in data analysis and storage. We are excited to be an investor in their future.”

And with a market of that size, startups are not only ones targeting it. Google has gone all-in on hybrid; VMware is also interested; and HPE has made some acquisitions to expand its hybrid computing business, as has Microsoft (at least twice), and Cisco.

Datrium — with its flagship DVX platform — has been one of the hopefuls in providing a specific area of data services to enterprises operating hybrid environments: data management and data backup, with customers ranging from large players in healthcare and finance through to media and entertainment. Interestingly, it’s doing so at a time when others like Rubrik have gradually been building more cloud-only solutions to expand beyond hybrid environments customers relying on these.

With this round Michael Mullany of Icon Ventures — formerly a VP of marketing and products for VMware — is joining the board of Datrium.

“We are thrilled to partner with Samsung and Icon Ventures to expand our technical and geographical momentum,” said Tim Page, CEO of Datrium, in a statement. “Enterprises globally have the same problems in simplifying compute and data management across on-prem and cloud. Where SANs don’t even have a  path to cloud, traditional HCI has too many tradeoffs for core datacenters – backup requires separate purchasing and administration, and cloud DR automation is seldom guaranteed. Larger enterprises are realizing that Datrium software offers them a simpler path.”

Aug
13
2018
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Microsoft stands up Azure Stack for government as JEDI contract looms

Microsoft announced today that it’s released Azure Stack for Azure Government at a time when it’s battling rivals at Amazon and other cloud companies for the massive winner-take-all $10 billion Pentagon cloud contract known as JEDI.

Azure Stack provides customers with a similar set of cloud services that they would get in the public cloud, but inside the cozy confines of the customer data center. For Azure cloud customers who are looking to manage across public and private environments, often referred to as a hybrid approach, it gives a common look and feel across both public and private.

“As a cornerstone of Microsoft’s hybrid cloud approach, consistency means government customers get the same infrastructure and services with Azure Stack as they do with Azure — the same APIs, DevOps tools, portal, and more,”Natalia Mackevicius, Program Director, Microsoft Azure Stack wrote in a blog post announcing the new program.

In addition, the company announced it had passed a third-party FedRamp certification. FedRamp is a government program that provides a standardized way for government procurement officials to assess cloud security.

“Azure Stack for Azure Government directly addresses many other significant challenges our top federal government customers face. This includes tough regulatory, connectivity and latency requirements,” Mackevicius, wrote in a blog post announcement.

While this product is geared for any government customer, this news could certainly be appealing to the Pentagon, which is looking for one vendor to rule them in its latest mega cloud RFP. While Microsoft wouldn’t comment on JEDI specifically because it’s in the midst of answering that RFP, the timing can’t be a coincidence.

Microsoft, along with other competitors including Oracle and IBM, have been complaining bitterly that the one-vendor contract process unfairly favors Amazon. These companies have recommended that the Pentagon go with a multi-vendor approach to prevent lock-in and take advantage of innovation across sellers. The complaints so far has fallen on deaf ears at the Pentagon.

Regardless, Microsoft is still battling hard for the massive contract and today’s release certainly bolsters their approach as they continue to fight to win the JEDI deal — and other government business.

May
09
2018
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Google to acquire cloud migration startup Velostrata

Google announced today it was going to acquire Israeli cloud migration startup, Velostrata. The companies did not share the purchase price.

Velostrata helps companies migrate from on-premises datacenters to the cloud, a common requirement today as companies try to shift more workloads to the cloud. It’s not always a simple matter though to transfer those legacy applications, and that’s where Velostrata could help Google Cloud customers.

As I wrote in 2014 about their debut, the startup figured out a way to decouple storage and compute and that had wide usage and appeal. “The company has a sophisticated hybrid cloud solution that decouples storage from compute resources, leaving the storage in place on-premises while running a virtual machine in the cloud,” I wrote at the time.

But more than that, in a hybrid world where customer applications and data can live in the public cloud or on prem (or a combination), Velostrata gives them control to move and adapt the workloads as needed and prepare it for delivery on cloud virtual machines.

“This means [customers] can easily and quickly migrate virtual machine-based workloads like large databases, enterprise applications, DevOps, and large batch processing to and from the cloud,” Eyal Manor VP of engineering at Google Cloud wrote in the blog post announcing the acquisition.

This of course takes Velostrata from being a general purpose cloud migration tool to one tuned specifically for Google Cloud in the future, but one that gives Google a valuable tool in its battle to gain cloud marketshare.

In the past, Google Cloud head Diane Greene has talked about the business opportunities they have seen in simply “lifting and shifting” data loads to the cloud. This acquisition gives them a key service to help customers who want to do that with the Google Cloud.

Velostrata was founded in 2014. It has raised over $31 million from investors including Intel Capital and Norwest Venture partners.

Jan
30
2018
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Red Hat acquires CoreOS for $250 million in Kubernetes expansion

 Red Hat, a company best known for its enterprise Linux products, has been making a big play for Kubernetes and containerization in recent years with its OpenShift Kubernetes product. Today the company decided to expand on that by acquiring CoreOS, a container management startup, for $250 million. Read More

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