HP's new CEO Leo Apotheker has made it clear that the server giant plans to dominate the cloud market, but as of right now, it has zero footprint in cloud computing. HP will build, partner and buy its way in, so who might the company acquire to catch up? Jo and Carl discuss the options in this week's episode of Cloud Cover TV.
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How will HP get to the cloud?
Jo Maitland: Hello, and welcome to Cloud Cover TV, our weekly show on all the GCS news in the cloud computing market. I am Jo Maitland, in from San Francisco.
Carl Brooks: I am Carl Brooks, here in Boston.
Jo Maitland: Happy Saint Patrick's Day, Carl. You know it is also evacuation day in Boston?
Carl Brooks: That is right. We used to call it Bunker Hill Day when I was a kid.
Jo Maitland: So you guys are celebrating the evacuation of the Brits?
Carl Brooks: Yes. They do not let us take that holiday off anymore, unfortunately, it is too bad. I always liked that holiday, actually, mostly because I got the day off.
Jo Maitland: It was a while ago. This week, our favorite calculator and oscilloscope manufacturer has gone all soft and fluffy; it is HP. The company is now staking its claim and the future of the business on cloud computing. They have been trying to get into gear for a while now, Carl, it seems.
Carl Brooks: Yea, it’s true. Leo Apotheker had a big show, he is apparently trying to right the ship, but honestly, it has been years now. It has been two, three years since cloud computing really got big, and the most they have managed is some kind of consulting services operation on a weird website where you can sort of, maybe calculate ROI if you are not . . . When you are a high tech company and you're getting lapped by IBM on messaging and cloud computing, it is really a sad sight.
Jo Maitland: He is the new CEO of HP and he gave a big speech in San Francisco this week. It was a long winded, heavy on buzzwords story about how the company is essentially staking the future of the business on dominating the cloud market. To that end, he said that HP will launch a platform as a service, meaning an application development environment via the cloud, sometime in 2012, clearly, no urgency from HP, for this marketplace. He said that they want to get into the infrastructures service market, too, with a public cloud infrastructure service launching anytime soon. HP has less than 2% of its revenue coming from software. They acquired Mercury and Opsware, two big software companies, but since being at HP, both those firms have not seen much growth. If the aim of the company is to dominate the cloud market, they are going to need a lot more cloud muscle. With that in mind, Carl, any thoughts on who they might buy? What do you think?
Carl Brooks: That is an interesting question. HP is infrastructure, that is pretty much all they do. It is servers, and servers, and more servers, and storage, and switching, and all that kind of stuff, but software, no. They could aim big here; they really do need to buy something. They got Opsware, which they rolled into their systems management, they just bought this company Vertica, which is a next generation, massively multi-paralleled databasing company, which is neat, but really small stuff, very nichey. It is possible, if Larry Ellison dropped dead tomorrow, HP and Oracle could probably merge fairly successfully. Oracle has the lock on business class and enterprise class software, and they could also see a real boost from a solid open source portfolio, what Oracle got from Sun, HP might actually be capable of supporting those things, unlike Oracle.
Then, they could drop all the cloud BS that Oracle has been spouting for the last nine, ten months, and everyone would be happy. HP would have software, Oracle might actually be part of a cloud computing ecosystem, however, it is not likely to happen. Same thing with SAP, HP has said they are not going to buy SAP, but it is the same position. They have a lot of cash, they are a humongous company, much bigger than Oracle or SAP, even with market valuations what they are, HP could probably successfully argue for a takeover. HP and SAP would be like putting two great danes in the cab of an 18-wheeler and asking them to steer; it just would not be pretty.
What they really need is, they either need to basically, pull some magic cloud rabbit out of their hat that nobody has ever seen before, just some awesome cloud software platform out of left field and dominate with that, or they need to go after one of the bigger, really established players in cloud computing and possibly buy them. What do you think, Jo?
Jo Maitland: The infrastructure space, if they wanted to make a real splash there, they could buy Rackspace. Rackspace is number two after AWS and Amazon, that would save HP building out infrastructure as a service all over the globe. The company claims it already has the data centers and the footprint to do that, but certainly they have not been selling services out of those data centers, so they are going to need a lot of new infrastructure and retooling, so Rackspace is possible. HP's market cap is $87 billion, Rackspace is at $4.5 billion, a drop in the ocean for HP, and that would certainly shake up the market. On the software side, platform is a service. They could go after somebody like Joint, which sells the whole stack as a service, and also sells that secret source to other individual companies, and to service providers that want to sell platform as a service, so Joint is a possibility.
They could go for somebody like Engine Yard, a successful platform as a service business, but based on Ruby, not so much interest with Ruby among enterprise developers; it is mainly social, mobile, web 2.0 apps that are getting built on Engine Yard. Cloudbees is another platform-as-a-service company, but those guys specialize in Java, so more appealing to the enterprise marketplace. These are all small-fry, Carl, nothing big. I do not know if there is anything else going on with Azure and HP.
Carl Brooks: Sure. HP is actually, on the announced shortlist of Azure-in-a-box buyers. Microsoft has said it is going to ship a certified Azure hardware/software platforms to certain vendors in order to branch out from Microsoft's own services. However, Microsoft, as of last fall, still has not gotten their stuff together and been able to certify a stack of hardware and networking that will run Azure satisfactorily in somebody else's data center. All these little pescas, like you said there, are issues for HP. Even if HP does supply Azure, it is probably only going to want to sell it into the XXL enterprises, where there would be a natural fit for that sort of thing. It is not going to want to compete with Microsoft on its own service; it is not going to be the core of its past strategy, it just cannot.
Dr. Leo said that they want to have a platform strategy. He has not been very specific, it just seems like, as a core strategy, it cannot be Azure, it cannot be even one of these little things. Really, all they are good at is infrastructure. If I say software, do you think HP? No. Do you think HP mail? No. HP apps? No. There is no base that they have in the company that can come in and offer either software services or platforms that people will naturally associate with, so it is a puzzle for them.
Jo Maitland: Oracle is sounding better and better, huh?
Carl Brooks: It absolutely is. If you are watching, Leo, buy Oracle. It would be a hoot for all of us.
Jo Maitland: That would bring Mark Hurd back into the C Suite, where he can continue fiddling his expenses to his heart's content. There has been talk of notable executives in the cloud market. There have been a couple other moves this week. Wendy Pirelli, who was formerly the director of cloud marketing at VMWare, has jumped ship, she is now landed at Abiquo, the cloud management company. Most notably, Chris Kemp, who was the CTO at NASA and a pioneer of the nebula cloud computing OS, which is now fed into OpenStack has actually quit NASA, he announced that this week. He has not said what he is doing, but the hope is that he will stay in the cloud market, so that will be interesting.
Thank you very much for watching, everybody. This has been Cloud Cover TV. Tune in next week for more insider news on the cloud computing market.