Cloud enablement

Clouds Gathering: It's Consolidation Time

10:45 AM -- Mid-July isn't the usual time for big news, but then cloud isn't the usual market these days. As it turns out, Tuesday was a big news day for cloud.

On top of the Citrix Systems Inc. (Nasdaq: CTXS)-Cloud.com Inc. deal came VMware Inc. (NYSE: VMW)'s announcement of its new cloud infrastructure capabilities, designed to address some of the key challenges the virtualization company faces in stretching its reach into cloud.

After most of the cloud M&A activity seemed focused on the communications service providers' efforts to buy up cloud players, the summer has been a vendor event, kicked off by Microsoft Corp. (Nasdaq: MSFT) and HP Inc. (NYSE: HPQ). (See VMware Unveils Cloud Infrastructure, Microsoft Calls On Telcos for Office 365 and HP Makes Big Cloud Claims.)

"The fact that VMWare announces updates to its cloud stack the same day Citrix announces its acquisition of Cloud.com just confirms the cloud race is still on," says Heavy Reading analyst Sarah Wallace. "Not only has VMWare beefed up storage with this upgrade, but security as well, an area that causes some to be hesitant about cloud services. And, since VMWare has upgraded its stack but still kept the product price about the same [as a product bundle], it may add to its appeal."

In the wake of his company's acquisition by Citrix, Cloud.com's CMO Peder Ulander speculated that the market for cloud infrastructure -- the layer between virtualization and the applications themselves -- is going to boil down to a handful of larger companies, some of whom see that critical layer as part of a much larger solution.

In fact, he believes the market may well come down to companies that use VMWare, those that use Microsoft and those that opt for an open-source approach. And it's in the latter category that Citrix/Cloud.com plans to shine, Ulander says, as both companies have been committed to OpenStack as the industry's best approach.

I'm not sure it will shake out that neatly anytime soon -- there are still IT giants who want a big stake of this market. But I do think this will be the summer when vendor cloud plans are set, and as with most telecom markets, only a few solutions are likely to survive.

— Carol Wilson, Chief Editor, Events, Light Reading

stevecrawf 12/5/2012 | 4:59:26 PM
re: Clouds Gathering: It's Consolidation Time

Certainly there is a lot of interest in offering infrastructure as a service, and I agree that we're going to see a shake-out where the industry will boil down to a handful of providers.

Why? Because the margins offered by many of these providers are razor-thin, which in part is driven by behemoths such as Amazon who have vast scales of economies.

We work with a number of telcos and distributors who use Jamcracker's platform and pre-integrated ecosystem of cloud service providers so that they can offer their customers more value-added services (for retention on core services as well as net new customer acquisition.

However we generally try to steer them away from offering only IaaS, because of the margin and commoditization issues.  But IaaS is a great offering when it is part of a broader catalog of cloud offerings that include infrastructure, collaboration, messaging, security, applications (SaaS), etc.

The results are very compelling for telcos who take this path.  As an example, telcos we've been working with typically see a 65% greater retention rate for broadband customers who purchase different cloud services, and over a 20% take-away for businesses who are using a competitor's broadband but purchase cloud services.


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