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Will HP's Acquisition of Eucalyptus Challenge Microsoft's Amazon Cloud Migration Push?

Hewlett Packard's surprising news that it has agreed to acquire Eucalyptus potentially throws a monkey wrench into Microsoft's recently stepped-up push to enable users to migrate workloads from Amazon Web Services to the Microsoft Azure public cloud.

As I noted last week, Microsoft announced its new Migration Accelerator, which migrates workloads running on the Amazon Web Services cloud to Azure. It's the latest in a push to accelerate its public cloud service, which analysts have recently said is gaining ground.

By acquiring Eucalyptus, HP gains a tool sanctioned by Amazon to enable AWS-enabled workloads in its private cloud service. Eucalyptus signed a compatibility pact with Amazon in March 2012 that enables it to use Amazon APIs including Amazon Machine Images (AMIs) for its open source private cloud operating system software.

The deal, announced late yesterday, also means Eucalyptus CEO Marten Mickos will become general manager of HP's Cloud services and will report to HP Chairman and CEO Meg Whitman. Mickos, the onetime CEO of MySQL, has become a respected figure in infrastructure-as-a-service (IaaS) cloud circles. But the move certainly raised eyebrows.

Investor and consultant Ben Kepes in a Forbes blog post questioned whether Eucalyptus ran out of money and was forced into a fire sale or if the acquisition was a desperate move by HP to give a push to its cloud business. HP has had numerous management and strategy shifts with its cloud business.

"One needs only to look at the employee changes in the HP cloud division." Kepes wrote. "Its main executive, Biri Singh, left last year. Martin Fink has been running the business since then and now Mickos will take over -- he'll apparently be reporting directly to CEO Meg Whitman but whether anything can be achieved given Whitman's broad range of issues to focus on is anyone's guess."

Ironically on Redmond magazine's sister site Virtualization Review, well-known infrastructure analyst Dan Kusnetzky had just talked with Bill Hilf, senior vice president, product and service management, HP Cloud. He shared his observations on HP's new Helion cloud offering prior to the Eucalyptus deal announcement. Helicon is built on OpenStack, though HP also has partnerships with Microsoft, VMware and CloudStack.

"The deal represents HP's recognition of the reality that much of what enterprise developers, teams and lines of business do revolves around Amazon Web Services," said Al Sadowski, a research director at 451 Research.

"HP clearly is trying to differentiate itself from Cisco, Dell and IBM by having its own AWS-compatible approach," Kusnetzky added. "I'm wondering what these players are going to do once Eucalyptus is an HP product. Some are likely to steer clients to OpenStack or Azure as a way to reduce HP's influence in their customer bases."

It also raises questions about the future of Helicon, which despite HP's partnerships, emphasizes OpenStack -- something Mickos has been a longtime and vocal supporter of. "We are seeing the OpenStack Project become one of the largest and fastest growing open source projects in the world today," Mickos was quoted as saying on an HP blog post.

Hmm. According to a research report released by 451 Research, OpenStack revenues were $883 million of IaaS revenues, or about 13 percent. They are forecast to double to about $1.7 billion of the $10 billion in 2016, or 17 percent. Not trivial but not a huge chunk of the market either.

HP clearly made this move to counter IBM's apparent headway with its cloud service, even though it appears the three front runners are Amazon, Microsoft and Google. In order to remain a player, HP needs to have compatibility with all three, as well as OpenStack, and acquiring Eucalyptus gives it a boost in offering Amazon compatibility, even if it comes at the expense of its server business, as noted by The New York Times.

In my chats with Mickos over the years, Eucalyptus hadn't ruled out Azure compatibility but admitted it hadn't gone very far last time we spoke over a year ago. Time will tell if this becomes a greater priority for both companies.

Regardless, 451 Research's Sadowski indicated that HP's move likely targets IBM more than Microsoft. "HP is hoping to capture more of the enterprise market as organizations make their way beyond Amazon (and Azure) and build out their private and hybrid cloud deployments," he said. "We would guess that in acquiring Eucalyptus, the company is seeking to replicate the story that IBM has built with its SoftLayer buy and simultaneous OpenStack support."

Posted by Jeffrey Schwartz on 09/12/2014 at 12:51 PM


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