A sign of the times or a startup in the right place at the right time? CA (formerly Computer Associates) acquired cloud software maker 3Tera today, and reports put the price well over the company's worth. The move comes as large enterprises show a growing interest in cloud computing and major IT solutions vendors are lining up to ready products.
"It looks like CA paid well over 30 times 3Tera's revenue. Such multiples are fairly atypical in tech [mergers and acquisitions] today, and very atypical for CA," said Dennis Callaghan, senior analyst for enterprise software at the 451 group.
Founded in 2004, 3Tera is well established as a cloud computing vendor, with a small but reliable pool of customers that use the company's AppLogic software. The company claims more than 80 customers, including service providers like BT, KDDI and Layered Technologies.
AppLogic lets data centers turn their virtualized servers into an Amazon Web Services-like pool of compute resources that can be easily managed and resold to customers in a variety of ways. The AppLogic platform focuses on application deployment, letting users create and save virtual stacks of servers for different applications and spin them up as needed. Callaghan said AppLogic fills a definite hole in CA's cloud line up.
"This isn't technology they already have," he said.
In a shift from more traditional IT monitoring and management tools, "CA is going beyond managing cloud environments and actually helping customers to get them up and running in the first place," said Callaghan.
CA's spending spree
CA has been on a cloud buying spree since 2008, adding Oblicore, NetQoS and Cassatt into its cloud offerings. The company said while it has pieces of the cloud puzzle, it was 3Tera's polished cloud management features that proved irresistible.
But did CA overpay? Depends on who you ask.
"How much is too much? If it's a piece you really want/need then it's whatever the seller demands," said Callaghan.
But some 3Tera competitors dismissed the acquisition. In a response to the news, Reuven Cohen, CEO and founder of Enomaly, tweeted that CA had "come calling, [but] we have no interest in a firesale."
Plugging in cloud management holes
It's more likely that CA specifically wanted 3Tera's cloud application management technology.
"There were a lot of cloud startups that we looked at," said Vincent Re, senior vice president at CA for cloud computing. "There must have been twenty of them. Many of them do very interesting things, but they were all over the map in terms of where they were."
Re said 3Tera lets virtualized servers and application stacks work seamlessly in a self-service way without having to significantly revamp IT operations. That, in turn, will help enterprises get over their fears of massive, costly restructuring if they want to use cloud computing technologies.
"A core of our strategy is showing our customers ways to get new or existing workloads into the cloud," he said.
Compared with Cassatt, another CA acquisition, 3Tera also provides virtualization and infrastructure automation, but the Cassatt technology is more "under the hood."
"3tera's all about enablement; Cassatt's all about optimization," Re said.
3Tera's customers and partners were a big part of the acquisition. 3Tera's long-running relationships with "second tier" managed service providers (MSPs) and its "cookie-cutter" rollout process will make it easy to sell the concept to big enterprises.
Furthermore, having a point-and-click GUI is increasingly important to CA's customers, who tend to be massive. Large enterprises want to mimic Amazon's service model in their own IT departments, Re said, and treat internal IT just like another outside service provider.
"In that case, the tools they need start to look a lot more like these smaller [3Tera-powered] MSPs," he said.
Most importantly for CA, the 3Tera acquisition gives them a fighting chance against so-called "next-generation" cloud platforms. Skytap, OpSource and Savvis, among others, all offer slick, mouse- and IT manager-friendly Web interfaces on top of their cloud platforms that look a lot like 3Tera's, and are all a far cry from Amazon's intimidating command line or Rackspace's shopping cart approach. Vendors integrating cloud management into cloud provisioning may be a key part of the upcoming battle for enterprise dollars. It's clear that CA feels that way.
Carl Brooks is the Technology Writer at SearchCloudComputing.com. Contact him at email@example.com.