OpenStack’s First Birthday: A Year in Review

OpenStack, the open source cloud computing project initiated by NASA and Rackspace, celebrated its first birthday on July 19. OpenStack’s open source code enables customers to create public or private cloud environments that deliver functionality analogous to that provided by private Infrastructure as a Service (IaaS) vendors such as Amazon Web Services, Joyent or Verizon Terremark. The OpenStack project began with the support of 25 companies but has grown significantly over the last year to the point where it now claims the backing of 80 companies that collectively offer financial and technical support to a staff of 217 developers. Current contributors include AMD, Canonical, Cisco, Dell, Intel and Citrix and start-ups such as Piston Cloud Computing and Nephoscale.

OpenStack’s offering currently contains three components: (1) OpenStack Compute, which allows customers to create and manage a hypervisor agnostic cloud computing platform featuring a network of virtual machines; (2) OpenStack Object Storage, for storing petabytes of data; and (3) OpenStack Image Service, to take, store and provide copies of virtual running machines. The core of OpenStack’s offering, OpenStack Compute, allows customers to create an IaaS cloud environment using code that has been maintained under an Apache license.

Key OpenStack milestones during the last year include the following:

• March 30, 2011: Rackspace, Dell and Equinix announce plans to launch an OpenStack demo environment intended to entice customers to investigate OpenStack’s cloud computing products.
• May 10, 2011: Canonical’s decision that the 11.10 version of its Ubuntu Enterprise Cloud would be based on OpenStack instead of Eucalyptus.
• May 25, 2011: Citrix reveals plans to deploy Project Olympus, the first commercialized version of OpenStack.
• July 12, 2011: Citrix acquires, and promises to build APIs between’s CloudStack platform and OpenStack.

Dubbed the Android of the cloud computing market, OpenStack promises to radically transform the cloud computing landscape by shifting market share from private cloud vendors such as Amazon Web Services and Verizon Terremark to an open source cloud operating system. The first year witnessed explosive development of OpenStack’s code, including three code releases named Austin, Bexar and Cactus, respectively. The fourth release, Diablo, is scheduled for distribution on September 22, 2011. OpenStack’s first year also witnessed notable deployments by Internap, Korea Telecom and Piston Cloud Computing.

In its second year, OpenStack aims to build upon its development progress by inaugurating more deployments in addition to rolling out new functionality such as networking support and identity management. If OpenStack continues to grow at a rate that comes anything close to what it displayed in its first year, expect it to leave an even larger footprint in the cloud computing space by the time of its second birthday in July 2012.

Quantifying Cloud Computing Market Share

Recent years have witnessed a proliferation of analyses about the size and relative market share of vendors in the cloud computing space. According to a post in GigaOM, UBS Analysts estimate that “the total market for AWS-type services will be between $5-to-$6 billion in 2010 and will eventually grow to $15-to-$20 billion in 2014.” Gartner, meanwhile, estimates that the IaaS market will grow from $3.7 billion in 2010 to $10.5 billion in 2014. Forrester predicts that IaaS spending alone will increase from $2.9B, projected to grow to $5.85B by 2015 in their recent report, Sizing the Cloud, Understanding and Quantifying the Future of Cloud Computing.

The discrepancies between these estimates of the current and future state of the IaaS space illustrate some of the difficulties specific to quantifying cloud computing market share, many of which of derive from the following reasons:

• The plurality of cloud computing modalities renders calculations of market share complex. While it’s true that the terms IaaS, PaaS and SaaS remain powerful terms for understanding cloud computing deployments, vendors are increasingly offering more than one variation of the IaaS, PaaS and SaaS trinity. Amazon’s Elastic Beanstalk, for example, constitutes a PaaS offering from the largest IaaS vendor in the space. Meanwhile, Red Hat offers an IaaS product called CloudForms alongside a PaaS offering known as OpenShift. Moreover, analysts may choose to include or not include SaaS, PaaS or consulting services from cloud computing products in their estimation of cloud computing revenue.

• Vendors often refuse to disclose cloud computing revenues, especially if they are privately held or otherwise multi-tiered businesses wherein cloud revenue is miniscule in comparison to revenues from other services. Amazon Web Services constitutes the paradigmatic example, here, but the recent acquisitions of Terremark by Verizon and Savvis by CenturyLink may serve as further cases in point, though most reports suggest that both Terremark and Savvis will function as independent business units within their parent company with detailed revenue breakdowns.

• Within the first half of 2011, Dell, HP, IBM, Oracle, Red Hat, Apple, Go Daddy and Microsoft have made increased commitments to cloud computing deployments in ways that promise to significantly impact the existing market share balance.

• The global nature of cloud computing renders quantification of market share challenging because many U.S. cloud computing vendors operate transnationally in partnership with other channel partners that may or may not report revenue in a transparent fashion. Consider Joyent’s partnership with ClusterTech and Qihoo 360 Technologies in China, for example, in this regard.

Despite these methodological difficulties, we can make some definitive statements about vendor revenue. Consider the following revenue data points, for 2010:

1. IaaS
a. Amazon Web Services: $500–700 million
b. Rackspace: $100 million
c. Terremark: $37.5 million, prior to acquisition by Verizon
d. Savvis: $15.2 million, prior to acquisition by CenturyLink
e. Joyent: $10- 20 million

2. SaaS
a. $1.3 billion
b. NetSuite: $200 million
c. Rightnow: $200 million
d. SuccessFactors: $200 million
e. Taleo: $200 million

Revenue for PaaS in 2010 is difficult to locate and widely believed to be miniscule. But given the sheer number and heterogeneity of cloud computing vendors and deployments, these numbers represent little consolation for analysts and investors seeking to understand trends in the cloud computing universe. How will Apple’s iCloud fit into this equation, for example? What about Facebook and Google? In what way will Microsoft’s Office 365 change market share in the productivity software space? Part of the difficulty of estimating cloud market share, here, involves the lack of a common set of standards for measuring the size of cloud computing deployments, in addition to the challenges specific to locating data for annualized cloud based revenue per vendor. Until inter-operability standards emerge, analysts will need to develop new methods of imposing discipline and rigor on the conglomeration of cloud computing forms. Meanwhile, vendors and customers alike should push for inter-operability standards that facilitate apples to apples comparisons of cloud offerings from vendors across the globe.

Go Daddy Offers IaaS Cloud Computing, With a Twist

Go Daddy’s recent announcement that it plans to enter the IaaS cloud computing market throws yet another twist into the contemporary evolution of the cloud computing space. Although competing directly with Amazon Web Services and Rackspace, the domain registration and web hosting company proposes an IaaS solution called Data Center on Demand that provides fixed server resources for a monthly fee in sharp contrast to the “elasticity” and “pay per use” attributes of IaaS cloud computing. Moreover, the marketing brochure for Go Daddy’s Data Center on Demand offering asks its customers whether they have professional IT staff, noting, “managing Data Center On Demand machines requires technical expertise.” The disclaimer about professional IT staff reveals that Go Daddy has yet to build user friendly management consoles that do not require the use of shell commands. The service does offer load balancing capabilities that “can load balance any volume of traffic among an entire network of machines” and are “amazingly simple to set up.” The twist in the evolution of cloud computing represented by Go Daddy’s cloud computing product concerns its use of fixed pricing for fixed server resources. Data Center on Demand is currently in a limited release version scheduled for full deployment in July. Go Daddy’s entry into IaaS cloud computing marks a strategic move to leverage its ubiquitous brand name and gargantuan customer base to make a dent in the cloud computing revenues of AWS and Rackspace. Expect small businesses with technically savvy resources to lead the charge amongst their initial round of customers. Larger enterprises are likely to continue to stick with Amazon, Rackspace and more user friendly, pay per use models for now.

Joyent and Qihoo 360 Technologies Poised to Gain Traction in China’s Cloud Computing Market

Recent announcements by Joyent and Qihoo 360 Technologies indicate that the use of cloud computing technology in China is poised to proliferate dramatically in 2011. On May 16, Joyent revealed details of an alliance with ClusterTech whereby ClusterTech would become the provider of public cloud services to companies in the gaming, media, mobile and social media space in China. Under this arrangement, ClusterTech will provision Joyent’s cloud computing SmartDataCenter 6 software to “service providers, data center operators and systems integrators” that will, in turn, provide Joyent’s cloud computing technology to media, gaming and mobile companies in China. In licensing its cloud computing software to a third party distributor, Joyent leverages a business model that differs markedly from most of its U.S. competitors such as Amazon Web Services and Rackspace that retain control over the deployment of their cloud computing operating systems. Joyent’s partnership with ClusterTech builds upon its previous entry into the Chinese cloud computing market in 2009 with a public cloud data center in the Qinhuangdao Economic and Technological Development Zone (QETDZ), Hebei Province, China. Meanwhile, Qihoo 360 Technologies, developer of China’s most popular internet security software, recently announced plans to enter the cloud computing space by providing online data storage. Qihoo CEO Zhou Hongyi mentioned the possibility of acquiring relevant companies in order to expand into the cloud computing and data storage space. The company’s first quarter revenue more than doubled to $22.9 million as compared to $9.7 million from last year, largely as a result of increased online advertising revenue. Qihoo went public in March through an IPO that valued the company at $202 million, with the IPO share value at $14.50. As of June 1, the stock is trading at $26.25 a share, up more than 81% from its IPO value.

LibCloud and DeltaCloud Lead the Charge Toward Cloud Inter-Operability

Apache LibCloud’s May 19 graduation from the Apache Incubator signifies that the race toward cloud inter-operability is firmly underway. Libcloud provides an open source Python library of back-end drivers that enables developers to connect to APIs of over 20 cloud computing platforms such as Amazon EC2, Eucalyptus, GoGrid, IBM Cloud, Linode, Terremark and vCloud. Developers can write code once and then re-deploy their applications on other cloud environments in order to avoid vendor lock-in and create redundant architectures for disaster recovery purposes. LibCloud was originally developed by the Rackspace acquisition CloudKick but subsequently migrated to the Apache Incubator Project in November 2009. LibCloud’s graduation from the Apache Incubator as a Top Level Project means that the product will be managed by a Project Management Committee that assumes responsibility for its evolution and subsequent releases. LibCloud is currently available under version 2.0 of an Apache Software License.

The principal drawback about LibCloud is its exclusive use of Python as the programming language to connect drivers to vendor APIs. Red Hat’s DeltaCloud, in contrast, leverages a REST based API that offers more flexibility than LibCloud’s Python library for the purpose of migrating software deployments from one cloud infrastructure to another. Like LibCloud, DeltaCloud is being groomed through the Apache Incubator project but has a few more steps to travel before graduation and the achievement of top level status. Nevertheless, open source options are clearly leading the charge toward cloud inter-operability although they all presently require the withdrawal of a cloud instance to a holding database followed by re-deployment through the activation of the linking API. In other words, neither LibCloud nor DeltaCloud enable developers to connect Amazon EC2 to Rackspace without an intermediary database as a preliminary step.

Top 3 Cloud Computing Market Trends for 2011

2011 has been an extraordinary year for cloud computing so far. Amazon Web Services (AWS) set the pace with an aggressive roll-out of products such as Elastic Beanstalk, CloudFormation, Amazon Cloud Player and Amazon Cloud Drive. Just when AWS seemed poised to consolidate its first mover advantage with respect to cloud computing market share, the landscape exploded with a veritable feast of product offerings, business partnerships and acquisitions. Every month another Fortune 500 IT or telecommunications company throws its hat into the cloud computing ring: Dell’s vStart, Dell’s recent partnership with SAP, IBM’s SmartCloud, Apple’s iCloud and HP’s BladeSystem Matrix mark just some of the big names and brands that have entered the cloud computing dohyo, or sumo circle. The cast of new actors has rendered the cloud computing space painfully difficult for analysts to quantify for the purpose of understanding relative market share and growth within the industry. But within this bewildering sea of change, three industry trends have emerged that deserve attention:

1. Outages across the industry signal demand outweighs supply
Demand for cloud computing services has begun to outstrip supply to the point where vendor processes for guaranteeing system uptime have become increasingly challenged. The Amazon Web Services outage of 2011 was the most glaring example of a lack of effective, scalable processes for one of the world’s premier IaaS vendors, but 2011 has witnessed notable outages specific to Sony PlayStation, Twitter, Gmail and Google’s Blogger as well. Expect more outages and service disruptions until the industry fathoms the time to develop processes for delivering on 99.99% SLAs as opposed to merely promising them.

2. Early Consolidation vs. the Proliferation of New Entrants to the Market
The past five months have witnessed Verizon’s acquisition of Terremark, Time Warner Cable’s acquisition of NaviSite, CenturyLink’s acquisition of Savvis and rife speculation that Rackspace lies next on the totem pole of potential buyouts. In tandem with the finalization of these acquistions, a slew of other companies such as Appistry, CA Technologies, Engine Yard, Flexiant, GigaSpaces, RightScale and ThinkGrid have emerged on the landscape and promise to collectively cobble together a non-trivial slice of the market while potentially transforming into significant niche players themselves. Expect new entrants on the scene, particularly in the open source space that will increasingly complicate the IaaS market share dominance of AWS, Eucalyptus, Rackspace, GoGrid and Joyent. Consolidations will continue but the market is unlikely to congeal into a few dominant players for quite some time.

3. The Rise of Open Source Cloud Computing Solutions
Rackspace, Dell and Equinux’s launch of a demonstration environment of OpenStack promises to change the industry by enticing customers to consider toying with its open source platform for free while paying for consultative support services associated with cloud design and management. Meanwhile, Canonical’s decision to change the cloud computing provider for its Ubuntu Enterprise Cloud (UEC) offering from Eucalyptus to OpenStack testifies to the strength of OpenStack and conversely, underscores Eucalyptus’s challenge in defining its value proposition as an Amazon EC2 compatible open source IaaS platform. RedHat’s open source PaaS product called OpenShift marks another leading contender in the open source ring by virtue of its deployment flexibility across the Java, Python, PHP and Ruby environments. Expect that open source IaaS and PaaS offerings will become increasingly robust and scalable. If open source solutions can demonstrate reliable, high quality portability across platforms, the market for less portable, private sector IaaS and PaaS solutions is likely to shrink dramatically. The fortunes of OpenStack, OpenShift and the recently formed Open Virtualization Alliance merit a close watch, in particular.