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.

My past fews weeks have been consumed with weekly visits to the Bay Area to speak at SaaScon, moderate tracks at Under the Radar and co-host the AlwaysOn OnDemand conference, as well as numerous on-site client meetings. In between, I also had the privilege of presenting a kickoff keynote presentation at a VIP dinner for the State of the Cloud conference in Boston.

My hectic travel schedule has given me little time to comment on a variety of industry announcements which have occurred during this period. So, here’s my ‘lightening round’ assessment of some of the more significant events worth noting,

• Cloud Conference Observations
  • SaaScon: When was the last time you heard CIOs talk about being heroes in their organizations? Well, the CIOs who spoke at SaaScon repeatedly described how the SaaS solutions which they’re implementing in their organizations are generating an overwhelmingly positive response from their end-users and corporate executives. And, they admitted that this has made their jobs gratifying again.
  • Under the Radar:  This was a terrific day of company presentations and American Idol-style judging sessions aimed at uncovering the next hot Cloud companies. Most of the presenters won’t become major players, but many may be acquired by bigger companies. While the remainder will die on the vine because of poorly conceived solutions or go-to-market strategies.
  • AlwaysOn OnDemand: It was a privilege to work with Tony Perkins and his staff to organize and co-host this first-time event. Tony is a living legend in the tech industry because of his association with the Red Herring publication and his very influential conference business. The AlwaysOn events have become important meetingplaces for industry leaders, investors and aspiring companies. The content of the OnDemand conference was also first-rate as you can see in the online videos.
  • State of the Cloud: What happens when a major financial institution decides that it wants to better understand the rapidly evolving cloud computing marketplace? Well, in the case of Fidelity Investments, they decided to put together a first-class conference aimed at top-level enterprise decision-makers. And, because of Fidelity’s tremendous influence, they were able to bring together a very impressive list of speakers and sponsors to examine various aspects of the cloud computing environment.
• VMforce: Salesforce.com’s new alliance with VMware might seem like a minor event for the casual observer who has yet to fully grasp the strategic importance of the company’s Force.com platform. However, Salesforce.com’s long-term success is predicated on building a large and loyal cadre of software developers on its Platform-as-a-Service (PaaS). While it has had some initial success, its growth as been stymied in part because of the proprietary nature of its development language. VMforce opens Force.com up to a vast community of Java developers and alleviates much of the concern about vendor lock-in. I expect Salesforce.com to reach out to other important development communities to encourage even broader acceptance of its PaaS capabilities, especially as it begins to feel competitive  pressure from Microsoft Azure.
• IT Service Management Wars: One of the key battlefields in 2010 which I identified at the beginning of the year is SaaS-based IT service management (ITSM). The latest entrant into this space is BMC which unveiled a new version of its Remedy solution built on Salesforce.com’s Force.com platform. BMC’s new offering follows Nimsoft’s release of an on-demand version of its solution shortly after its acquisition by CA was announced. You can expect plenty of additional acquisitions in this market segment as IT organizations become increasingly receptive to SaaS alternatives to traditional, on-premise management systems.
• Cloud-Oriented Application Monitoring and Management: Now that SaaS solutions are becoming mainstream and more enterprises and ISVs are leveraging PaaS and Infrastructure-as-a-Service (IaaS) to develop and deliver applications, the new battlefield is Application Monitoring and Management. I’ve not only be deluged by a continuous stream of briefings from start-ups in this segments, but also had the pleasure of moderating the Application Management track of  the Under the Radar conference where some of the hottest new players in this segment showed their wares. While the fundamental value proposition of these companies is compelling, I expect many of them to struggle to convince corporate decision-makers, as well as  service providers, that their solutions are necessary to optimize the performance of their cloud-based applications and operations as opposed to ‘nice to have’. So, you can expect a flurry of quick acquisitions and then a prolonged series of company failures.
• Interesting reading,
  • Banks to build their own cloud-based global banking infrastructure and network - Is this a new cloud or the realization of the old ‘extranet’ idea?
  • SaaS-querade: When On-Premise Vendors Try to Pass as SaaS Vendors - This column echos the talks I give about why SaaS is different than hosting and the old ASP model.
  • The Next Crisis For Customer Satisfaction - This column challenges CIOs and business decision-makers to understand how enterprise applications must change to better serve end-users and achieve their corporate objectives. Salesforce.com Chatter is an example of where the world must go.

Finally, check out my new online presentation entitled, “Will SaaS and Cloud Computing Dis-Intermediate the Channel?”