Tech giant EMC has bought open cloud provider Cloudscaling, according to reports, bolstering the firm’s push towards OpenStack.
The reports, which first surfaced in Bloomberg, gave little information regarding further details, but suggested that the deal was worth less than $50m.
Cloudscaling delivers on-premise elastic cloud solutions and is a key provider of OpenStack-powered IaaS for private and hybrid cloud, through its OS, Open Cloud System. EMC’s acquisition evidently plays into that space, yet there are other factors at play.
Here are both sides of the coin as to why EMC has moved in for Cloudscaling:
EMC needs to keep itself cloud-relevant as a legacy vendor
It’s a trend which is impossible to miss. Long standing technology vendors are reinventing themselves as agile and innovative. A lot of that is by moving operations to the cloud. Take the IBM and SAP partnership announced yesterday. These are two companies that have been partnering decades before cloud computing as we know it today existed.
For other companies, OpenStack is another route in trying to maintain relevance. Scott Kupor, in an Andressen Horowitz blog post, summed it up best: the established firms, once beneficiaries of free-flowing venture capital, are rapidly becoming victims of the cloud push. He cited SAP specifically as a company which was doing it right.
“SAP is not standing idly by,” he wrote. “Why? Because the financial consequences of being on the wrong side of technology platform shifts can be monumental.”
It’s a difficult process, hence why a lot of players are getting in early. Legacy firms can rely on fat government contracts, and other major clients who aren’t going to about turn any time soon, but that money will dry up eventually. With a push towards open source computing and trying to avoid vendor lock-in at all costs, there are OpenStack businesses available – and that’s the route EMC appears to have gone down.
EMC needs to beef up its non-VMware operation
As has been de rigeur of late, larger tech firms are spinning off into two. HP did it, as has Symantec, while eBay is separating PayPal from its other business.
EMC owns VMware, which it had bought back in 2003. Earlier this week hedge-fund manager Elliott Management said it had sent a letter to the board of EMC advising them to cast off its VMware unit.
Nothing concrete has come back from the company saying whether this will happen, yet as Ron Miller noted in TechCrunch: “If EMC joined the parade of companies breaking in two, and it spun off VMware, it would be left a modest sized company.”
But what’s next? As reported earlier this week, long standing merger rumours between EMC and HP have ground to a halt. Yet now HP has siloed its cloud and enterprise operation into a separate service, could the two firms come together if EMC spins off VMware?
What do you make of this move? How would you define their strategy? We’d love to hear your comments.