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June 3 was a busy day for OpenStack news, as not one, but two vendors were acquired: First, Piston Cloud Computing was bought by Cisco, and then Blue Box Cloud was picked up by IBM.
Two independent OpenStack vendors picked up in one day was certainly a surprise, but only due to the timing. The simple truth is that many in the industry, including yours truly, have been predicting OpenStack consolidation for years. Simply put, the market can only sustain so many vendors.
OpenStack is an infrastructure play and provides an open integration framework into which any manner of technology or capability can be plugged, including compute, storage and networking. While demand for cloud services is high among enterprises, not every enterprise wants or needs to build its own private cloud and there is only a need for so many vendors.
I’ve had the good fortune of spending a lot of time with the founders of both Piston and Blue Box, and both companies have exceptional leadership and technology capabilities. Piston is home to one of my favorite marketers in the OpenStack world—co-founder Gretchen Curtis. Curtis has moderated multiple OpenStack Summit panels that I’ve participated on, and her keen insight of what matters is unparalleled. Her co-founder, Joshua McKenty, was the guy who in the early days of OpenStack I would turn to for the truth about what was going on.
Although I have long respected Piston efforts, it was clear to me and many others that it wasn’t going to stay an independent company for long. And McKenty’s departure from Piston in 2014 to join Pivotal made it painfully obvious that something was going to happen to the company. In fact, at the recent OpenStack Summit in Vancouver, British Columbia, Piston came up in more conversations than any other vendor as the next company to either be acquired or go out of business.
Piston’s founders came from NASA, the birthplace of OpenStack’s compute technology. The other company that came from NASA’s OpenStack roots was Nebula, which was founded by former NASA CTO Chris Kemp. Nebula had raised $38.5 million in funding but was unable to fully establish itself as a profitable business entity, and on April 1 it ceased operations. Since then, many who track OpenStack have been guessing who would be next, and Piston was a name that I heard more than once.
As opposed to Nebula though, Piston found a buyer in Cisco. Piston recently shifted its strategy a bit—away from being a pure-play OpenStack vendor to focusing on the cloud as a whole. Just a week after Nebula’s collapse, Piston announced its CloudOS technology, which evolved out of the company’s Piston OpenStack efforts. With CloudOS, Piston became a platform for the deployment of multiple types of workloads, not just OpenStack. Cisco already has plenty of OpenStack expertise, and its CTO of Cloud, Lew Tucker, is the well-respected vice chairman of the OpenStack Foundation. What Cisco needed was more non-OpenStack-specific expertise, and that’s where Piston fits in.
Plus, Piston has a number of interesting non-publicly disclosed customers in government that are likely very attractive to Cisco, which makes the purchase all the more appealing.
What’s Behind the Surge in OpenStack Consolidations
The irony of Piston’s acquisition by Cisco though is that it occurred on the same day that IBM bought Blue Box. The first time I met with McKenty, he told me his goal was to be big enough to buy IBM. And I had long thought that Piston’s technology would make sense for IBM, but IBM had other plans.
IBM instead bought Blue Box Cloud, a company that was founded by Jesse Proudman and has raised $26.6 million in funding. I remember well the first time I met Proudman—at the 2013 OpenStack Summit in Hong Kong. At that point in OpenStack’s evolution, I was getting more pitches from vendors than I cared to look at, including Blue Box. Proudman was relentless, however, and tracked me down at a hotel bar, where I got my first Blue Box Cloud briefing. Proudman is a true entrepreneur, and at the recent OpenStack Summit he detailed how he used every avenue possible to build his company.
Blue Box Cloud isn’t about technology but rather about managing technology. That is, Proudman’s basic premise is that OpenStack is complex and so requires expertise to manage. The promise of Blue Box is managed OpenStack either as a hosted or on-premises model. Proudman positions the Blue Box Cloud on-premises model, announced on May 18, as a VCE vBlock-type of idea for the cloud.
That’s an idea that apparently resonated with IBM too. IBM is also increasingly moving into the services-based model, and Blue Box cloud fits well within that strategy.
The parallels across Blue Box and Piston are that both had some form of differentiated service that the big vendors did not have but wanted. On their own, neither Piston nor Blue Box could likely ever have achieved the scale and the sales channel reach that Cisco and IBM will now provide.
That’s not to say that independent vendors won’t continue to be a key part of the OpenStack market. SwiftStack, which focuses on storage, and Tesora, which focuses on databases, are two prime examples of OpenStack vendors that I suspect will remain independent for some time. And Mirantis, which has emerged as the largest of the independent OpenStack vendors, is positioning itself for a future IPO. All of those vendors have strong support and service elements, which is where revenue can be found.
In the final analysis, what’s driving OpenStack consolidation is the need for operational scale. Deploying OpenStack and building a proper sales channel takes time and resources that are not as large at startups as they are with the big vendors. For those OpenStack vendors that have the financial wherewithal to sustain ongoing operations through cash flow, they will remain independent, unless of course a big vendor comes knocking with an offer that they can’t refuse.
Sean Michael Kerner is a senior editor at eWEEK and InternetNews.com. Follow him on Twitter @TechJournalist.