The OpenStack opportunity

ps: I am not a fan of on-prem products, but whether I like something or not is immaterial to what actually happens in the market. I do see play for on-prem products for a longtime to come.

Short post on why the consolidation in OpenStack market is a sign for new start ups to emerge. First of all, people who say consolidation is a sign that market is done should look at Application Performance Management market. If this were true, neither NewRelic nor AppDynamics should exist. Every known APM vendor of the 90s and 2000s is now gone, acquired by large companies and became irrelevant. That was previous generation. New Relic, AppDynamics, have took a fresh approach to solving the problem and are now thriving. Consolidation, in my mind is a sign that older generation is squeezing lemonade out of lemons and newer generation has space to grow. What we are seeing now is that the older generation of OpenStack start ups are getting acquired.

So, what do I expect large tech vendors buying these OpenStack start ups to do?

1. Marketing

These guys will market OpenStack heavily. Every person that is even remotely connected to tech industry will hear about OpenStack. They will generate enormous buzz.

2. Invest in Ecosystem

The large vendors will invest resources into OpenStack ecosystem. They will create training programs, create certifications. They will pay millions in partner marketing to channel partners. They will stuff the channel with OpenStack products and services.

3. Fight for Services Revenue

Large tech vendors will fight each other for who can bring to bear the most complete offering of services. They will compete with each other to sell seven figure Openstack deals to large enterprises. They will use it to sell other services to these customers. Some of these seven figure deals will happen and almost all of those projects will fail in 5–7 years.

4. Forget Product

Unfortunately, due to the way things work in large tech companies, they will become so busy with previous three things, they will forget product. The product complexity will not be addressed and it won’t be packaged in a way that can be consumed without use of professional services. I do think HP has a shot at avoiding this trap due to the talent they have from Eucalyptus, but we shall see. The politics of a large tech vendor often manage to kill the drive of entrepreneurs.

I believe this gives an opening to new generation of start ups that focus on the following.I will admit that I don’t know how the market may develop, but below is my guess.

1. User Experience

Easy to install, Easy to get started, Easy to demo. It should be a pleasure to use the product. The console for Openstack environment will be user friendly and should make for a compelling demo. Doesn’t require massive server or infrastructure to run simple eval/demo. Take the OpenStack complexity away from the target user.

2. Developer Friendly

Focused on enabling developers to use Openstack environment. Make it developer friendly. Integrated with development tools. I don’t yet know fully what does this mean for all components of Openstack, but smart guys will figure it out.

3. Product Focus

Have a product focus. Its a packaged product with all that is needed to get started, run it and scale it for the organization. This is where large companies will struggle to fight you.

4. Bridge the gap between public cloud and current state of DC tech.

The new breed of vendors don’t have to solve the problem of a private cloud for an enterprise. They need to provide a temporary platform on the way to public cloud adoption. OpenStack can play an important role in being this transition technology on the journey to public cloud and start ups need to enable that.

5. Solve newer challenges

What newer challenges could you solve with a base technology that lets you leverage your existing hardware?. What about Tier 2 or Tier 3 workloads that does not need the power of a public cloud and can be done cheaper by leveraging your existing hardware. Apply a different filter to the problem. Can Openstack based environment be your test/dev environment while public cloud is the production for scale?. Can OpenStack based solution be where you run the workloads that have data residency requirements?.

You could argue why can’t large tech vendors do these things? The reason is simple. Their Resources, Processes and Values are not aligned to this model as they are optimized for enterprise sales with lots of services and complexity.

What do you think?

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