THINK IT Services

Dimension Data’s acquisition of OpSource marks the end of an era and illustrates how the Cloud Computing competitive landscape is expanding to encompass every type of tech vendor and service provider.

Although it is only a fraction of the size and has only a fraction of the brand equity of Salesforce.com, OpSource has had a disproportionate impact on the growth of the Software-as-a-Service (SaaS) market and broader Cloud movement.

The company’s CEO, Treb Ryan, has been a tireless evangelist for the business value of SaaS and now the Cloud. He and his staff have invested heavily in educating and facilitating the industry’s growth through an endless stream of webcasts and whitepapers, and founding the industry’s most important annual gathering, the SaaS Summit, now known as “All About the Cloud” and managed by the SIIA.

Rather than simply offer a set of hosting services, OpSource put together the first federated SaaS enablement model and associated ecosystem to help established independent software vendors (ISVs) and start-ups migrate to a SaaS delivery capability. It also acquired one of the pioneers in the SaaS billing and provisioning business, LeCayla Systems.

Despite all of its work to promote SaaS, the company struggled to make a living in this segment of the market because there is only a finite number of aspiring SaaS vendors that could appreciate and afford its services. It was given new life when it broadened its attention on the infinite opportunities in the rapidly expanding Cloud Computing market. It also won a strategic investment and established an alliance with NTT which appeared to have the inside track for an eventual acquisition.

It has long been speculated that Opsource was an acquisitioin candidate for larger service providers, including Verizon and AT&T. IBM, HP and Dell were also considered potential acquirers. This speculation gained even greater intensity with the recent acquisitions of Terremark, Savvis, NaviSite and other Cloud/hosting companies.

Dimension Data is a global value-added reseller and services company that probably wasn’t on many people’s radar screen as a potential acquirer. It has ascended from the price sensitive hardware sales business by offering a widening array of managed services. It recognizes that it now must extend those services to the Cloud level. It will be interesting to see how far and fast OpSource will move them in this direction.

OpSource will retain its brand and become the centerpiece of Dimension Data’s broader Cloud portfolio of products and services. Retaining OpSource’s executive team will be essential to optimizing its value because few companies are as dependent on the brand equity of their executives as OpSource.

However, OpSource also began promoting its ’secret sauce’ recently. It is a Cloud orchestration software suite which accelerates the deployment of Cloud services by traditional service providers and relative start-ups. This solution was recently at the heart of a new alliance with VCE, the joint venture of VMware, Cisco Systems and EMC.

Dimension Data is a key reseller of VCE solutions and integrator of VMware, Cisco and EMC products. So, it will probably try to leverage OpSource’s Cloud enablement functionality to not only support its own Cloud services, but as an additional asset to support its service provider customers.

Regardless of OpSource’s future direction, everyone in the SaaS and Cloud Computing industry owes Treb Ryan and his team considerable thanks for their significant work in building this exciting and rewarding marketplace. Knowing how hard surviving this type of acquisition can be, I wish them well and am hoping for the best from this transaction.

OpSource and the Virtual Computer Environment (VCE) Company announced an alliance today which will offer joint solutions aimed at helping service providers (xSPs) launch public cloud services more quickly. This joint initiative is the latest effort by various vendors to enable  xSPs to fulfill their promise as potent ‘cloud brokers’.

VCE is a joint venture formed by Cisco and EMC, with additional investments from VMware and Intel, to create a new generation of networking, storage, virtualization and management technologies to improve xSP infrastructure operations. VCE’s primary product is the Vblock™ Infrastructure Platform for virtualization, data processing, networking and storage capabilities in cloud computing environments.

In this new alliance, OpSource is adding its cloud orchestration software capabilities to VCE’s Vblock Platform to enable xSPs to handle the user sign-up, provisioning, metering, billing, and reporting requirements associated with cloud services. Together, OpSource and VCE’s combined solution promises to eliminate needless development costs, accelerate the service providers’ time to market and reduce their ongoing cost of operations.

OpSource and VCE are not the first to market with a cloud orchstration solution. BMC, HP and Parallels have also announced cloud orchestration solutions for service providers, among others. However, VCE is backed by powerful xSP vendors and OpSource adds a competitive edge based on its extensive hands-on experience delivering cloud services.

I’ve worked with nearly all of the major xSPs who are trying to win a share of the rapidly evolving cloud marketplace. They are all in a hurry to rollout cloud services, but plagued by their traditional corporate cultures, legacy infrastructures and byzantine business processes. So, none of these cloud orchestration solutions can be expected to win a lot of xSP contracts short-term. It will be a long sales process.

Beyond the obvious opportunities and challenges associated with selling these cloud orchestration solutions to xSPs, what fascinates me even more is how this alliance moves OpSource into a different position in the market.

In fact, when I was briefed by OpSource execs about this announcement, the first word that came out of my mouth was “Opsware”. For anyone who is not familar with Opsware, it was a hosting services software orchestration vendor acquired by HP after it was spun out of LoudCloud which was a hosting services company acquired by EDS a decade ago.  

Silverback Technologies went through a similar evolution in the managed services realm, shifting its business from selling services to offering a software platform to other MSPs which was eventually sold to Dell.

Now, OpSource appears to be moving down the same software path offering its ‘platform’ solution to other xSPs.

Years ago, I considered the week leading into Labor Day as the final hurrah of the Summer and tried to preserve it for an end of season vacation to cap off the warm weather months in New England. Then my kids became school age and schools started kicking off before the holiday weekend. (Don’t get me started on this silly practice.)

Now, the tech industry is also making a habit of getting back into stride for the new Fall season before the dog days of August are behind us. One of the important annual venues for kicking off the new season of activity is VMworld.

This year’s event is generating plenty of news, especially regarding cloud-oriented acquisitions and alliances. Here’s a quick sampling:

• VMware Acquires Integrien and TriCipher 
• Verizon and VMware to Launch Enterprise-Class Hybrid Cloud Solution 
• BlueLock Introduces VMware vCloud Datacenter Service with CloudConnector 
• EMC Transforms Management of the Private Cloud, Ionix Unified Infrastructure Manager 2.0 Now in Customer Beta
• Citrix Acquires Virtualisation Firm VMLogix 

Why all the buzz surrounding this event?

Virtualization is one of the critical building blocks for creating cloud computing environments and VMware has become a key player in the cloud computing marketplace. As a result, a widening array of tech companies, service providers and channel organizations are aligning themselves with VMware. At the same time, other virtualization vendors are trying to keep pace with VMware’s capabilities and strategies.

This week’s acquisitions, alliances and other announcements are just the latest illustrations about how this marketplace is evolving and the competitive landscape is shifting.

For instance, performance and access management are pivotal pieces in a public or private cloud computing environment. This is the reasoning behind VMware’s acquisition of Integrien and TriCipher, and part of the thinking that drove Citrix’s acquisiton of VMLogix.

So, while the Dell/HP bidding war over 3Par has captured plenty of attention, other industry players are staking their own claims on a share of the rapidly expanding cloud computing market opportunity.

The first week of 2010 was marked with three quick mergers and acquisitions in the Software-as-a-Service (SaaS) market.

They each were in different sectors of the industry and involved differing types of transactions, but still clearly illustrated that there are a variety of companies seeking to capitalize on the escalating demand for SaaS solutions and position themselves as strategic sources of these on-demand services.

The first was an acquisition by EMC of Archer Technologies, a privately-held governance, risk and compliance (GRC) software vendor who offers both on-premise and SaaS solutions. Archer claims to have more than six million licensed users, including 25 of the Fortune 100.

EMC plans to combine Archer’s information risk management capabilities with the information security solutions provided by EMC’s RSA Security Division to enable customers to automate and gain visibility and policy enforcement capabilities across both physical and virtualized IT environments.

The second transaction was the $100 million acquisition of Peopleclick–a provider of SaaS-based Talent Acquisition and Workforce Compliance and Diversity solutions–by private equity firm, Bedford Funding who plans to merge Peopleclick with Authoria, an existing portfolio company of Talent Management solutions.

Bedford hopes the combination of these companies, operating under the new name of Peopleclick-Authoria, will create a leading provider of  Talent Management software, services and consulting solutions for enterprises worldwide.

These two transactions are in keeping with my previous prediction that we would see a consolidation in the SaaS market as various companies attempt to pull together end-to-end portfolios that can better position themselves as strategic sources in the eyes of IT and business decision-makers within customer organizations.

The EMC acquisition of Archer is the latest in a year-long buying spree that has spread the vendor’s reach well beyond its core storage solution capabilities. In particular, EMC has been making a concerted effort to strengthen its position in the security, automation and management areas.

The merger of Peopleclick and Authoria is a typical private equity roll-up maneuver aimed at trying to generate greater business value by pulling together a series of under-performing assets. While this type of strategy is textbook material for PE firms, it will take a lot more ’special sauce’ to make it successful from a competitive point of view.

Meanwhile, Salesforce.com made an unannounced acquisition of GroupSwim, a provider of on-demand social software for businesses. GroupSwim was developing a Web 2.0-based user interface that captures collaborative work in multiple formats using semantic technology. The company’s software automatically tags,  rates and searches content (discussions, emails, documents, wikis), and identifies topical experts.

The GroupSwim acquisition fits well with Salesforce.com’s recent initiative, Chatter, aimed at providing enterprise-class social networking to businesses. It also is in keeping with the company’s past practice of acquiring companies while they are young, relatively inexpensive and can easily be merged into Salesforce.com’s ongoing operations and corporate culture.

This flurry of activity may be a barometer of a busy year of M&A transactions to come.