NephoScale, CloudPassage and OpenStack make some cloud noise

On this week's episode of Cloud Cover TV, new Infrastructure as a Service provider NephoScale takes on Amazon Web Services while Rackspace finds an OpenStack customer and cloud security startup CloudPassage comes out of stealth mode.

And check out the Cloud Cover TV home page for the rest of the episodes.

Read the full transcript from this video below:  

NephoScale, CloudPassage and OpenStack make some cloud noise

Jo Maitland: Hello, and welcome to Cloud Cover. This is our weekly
cloud computing show on all the juiciest news in the market. From San
Francisco, my name is Jo Maitland.

Carl Brooks: and I’m Carl Brooks.

Jo Maitland: This week we are going to kick off, as usual, with some
news on the startup marketplace. I talked with a gentleman by the
name of Bruce Templeton this week, who runs a new company called
NephoScale; Nephos is actually Greek for cloud. This company,
Bruce's background, he was at Bay Network Cisco Foundry. When
Foundry sold to Brocade, he made a bunch of money, then he
bought a hosting company in Silicon Valley called Silicon Valley
Web hosting; they have a few hundred customers, about 2,000
servers. He has decided he is going to turn this hosting
business into an infrastructure as a service business a la
Amazon Web Services.

I was thought, 'Awesome, this is exciting, very ambitious. How
do you plan to go about that? Tell me about your data center
footprint?' He says, 'Well, right now they have one data center
in Silicon Valley,' which is pretty much, as far as I know, on
the San Andreas fault line. I said, 'Well, in case of an
earthquake,' which is not impossible out here, 'Where do you
guys fail over to? One of the biggest applications for Cloud
computing is disaster recovery. What is the secondary site?' He
said, 'Well, no, right now we just have the one data center.'
Exactly, if you're hosting in NephoScale's offices down there in
Silicon Valley and the big one hits, you are s*** out of luck,

He says some VC in the Valley told him that the day he gets his
second data center will be the day the value of his company
doubles, and I actually think that is polite and being nice. I
think the day he gets a second data center is the day he has a
business, especially in cloud computing. If he does not have any
kind of fail over, I think he is going to have a tough story to
tell there. That was kind of interesting.

There has also been news from Rackspace, right, Carl?

Carl Brooks: Yes, that is true. From Rackspace's side, they’ve
actually got  an open stack customer in the wild, a hosting
company called Internap is actually deploying open stack as an
infrastructure as a service in one of their big data center, it is a
beta service for them, but it is actually going to run much like
Amazon, you know, on demand, et cetera, et cetera, but it is
using this joint technology from Rackspace and NASA in-suite,
which was interesting. When open stack was announced, it got a
lot of buzz last year, but there actually was not a product, they
did not have any software to release until about six months later.
Now they have that software released, and apparently it is good
enough that a decent-sized hosting provider is actually going to
give it a try, which again, is interesting because is Rackspace
cutting their own throat with the competition or are they just
ensuring a level playing field? They will say one, other people
might think differently, but it is definitely an interesting

For NephoScale, they definitely have an issue if they only have
one data center that they are going to run a cloud in, because
the whole premise is that the whole thing is distributed. Amazon
is able to do that immediately because they are such a big
company, they already had a presence, east coast, west coast
data center space there, so they put their cloud platform in
either place and got up and running, and they have steadily
added more availability zones.

Jo Maitland: Right

Carl Brooks: That said, this guy could buy hosting just like Amazon
did. There is nothing stopping him from going to Equinox in Virginia
and saying, 'Hey, give me 5,000 square feet. I will pay you as I
get customers in.' If it is cloud you can try stuff out, see
what sticks.

Jo Maitland: Yes, exactly. True, true. I do not know, I think trying to
build out your own data centers these days is crazy; the expense
of it is ridiculous. He is also self-funding, he has bootstrapped this
company, I think that no VC that has been paying any attention
to the cloud computing market is going to give him money to
build out data centers. That would be the most absurd thing.

He did say that they looking at a secondary data center in Asia
sometime this summer. I think at that point, it is worth
revisiting those guys, but for now, I think that they got a long
way to go. How about that the sudden news in the cloud security
market? There is a new company come out there.

Carl Brooks: Right, yes, it is a startup. They have been in stealth-mode,
meaning nobody has been paying any attention to them for a little while.
It is a company called Cloud Passage. The CEO is a guy named
Carson Sweet, he is kind of a technology guy. It is interesting
because it actually looks like it might literally be a cloud
security product which we have not seen really much of to date.
We have seen people doing the same old fashioned security, end
point securities just in various cloud environments, and that is
really not, it does not really address the unique problems of
cloud, and it really does not address anything. It does not
really change anything, all you have really done is slap a cloud
label on your anti-virus product or whatever.

What Cloud Passage is selling is agent-based security. It lives
on your Linux server, and it talks to, they run a service and
you got this little agent that lives on your machine, and the
unique thing about it is that it goes with your elastic scale,
so as you scale up and down, you had launch 10, 20, 30, 100
servers, however many, every server instance it launches up
contains this little thing in it which goes back to talk to
Cloud Passages service, and it gets updates, patches, it gets
whatever it needs to make sure that each instance that you clone,
which is exactly the same as the one you started with, does not
suffer from a sudden, terrible vulnerability, where you suddenly
have one server that is vulnerable, you suddenly have 100 servers
that is vulnerable; this addresses that in a somewhat unique way
I do not think we have seen. It is ideal for people using
products like Chef or services like Right Scale, which makes
heavy use of Chef where, this sort of automated scale up and
scale down happens very, very often where one problem can
suddenly multiply itself really quickly.

It is interesting. We will see if he has got any buyers. Right
now he has got about 15 customers, he said, mostly doing web
services and SAAS, plans to support VMware, Windows,
all the various Cloud technology platforms that are out there in
due course. It is interesting because it seems to address the
unique problems that Cloud brings, rather than simply bringing
an old model into a new one.

Jo Maitland: So, is the customer the Cloud service provider, like,
if you are a cloud management provider like Right Scale, or is it
enterprise IT?

Carl Brooks: It is going to be the end user. It might be the enterprise, it
might be a web service company, it might be someone using Right Scale,
but it is an end user product. It is definitely for the Cloud user.

Jo Maitland: Interesting. Switching tacks a little bit to the big guys. We
are in earnings season right now, and Intel just reported a stellar
quarter, and actually is attributing some of their success to
the cloud computing market which is, perhaps not surprising, so
the numbers are really great. I am going to read this one, so I
do not get the numbers wrong. They said 2010 was their best
financial year in the company's history, $3.4 billion in profit
last quarter, that is profit. $1.1 billion increase from 2009.
Revenue was up by 8%, to $11.5 billion in the quarter, and the
company said, 'This is a result of high demand for chips for the
new build out of new data centers.

I thought it was interesting because everybody focuses these
days on the end point, on the consumer side, on tablet PCs and
smartphones, and they are the exciting, cool thing, but behind
all of that are these massive arrays of servers of which are
running X86 Intel chips, powering all of these end point
devices. It might, there is a little bit of buzz there in
marketing, from Intel, but I think they probably have a point
that. I bet they are building out huge data centers; they are a
big piece of that.

A little bit of news from Amazon too, from the web services
business. There are reports on the web, Forbes was writing that
their 2005 EBITDA, that is earnings before taxes get taken out
and other deductibles, their EBITDA margin was like 6% or
something, and it has dropped down, in 2010, to 4%. Now the
question is, is that because they got competition like
Microsoft, Google, those guys, or is it international expansion?
Are they spending money on marketing? What do we hear on the
inside around what is happening at AWS? Any interesting news there?

Carl Brooks: Yes, there is some. For one thing, it is important to
remember that cloud is still basically beer money to Amazon.
Nobody is exactly sure how much money they are making selling
EC2, S3, and AWS cloud services, because they do not really
break it out in their financial disclosure. They break out, their total
amount of revenue for the last year was $28 billion, or something
pretty sizable.

All of the ancillary services that are not directly related to
retail sales through, they lump into something called
Web Services, and this includes credit card billing. They will
pack and mail stuff for you, and all of the Amazon sellers who
sell their own baby shoes or what have you on Amazon, they all
get lumped into this, and what gets lumped into this is AWS as
we know it, EC2 and S3, all the different services. It is really
tough to tell exactly how much money is flowing from selling
computing services versus all those things that they also sell,
which are also important parts of the business, but still small.
It is not surprising to hear that that their are overall
business is actually still running essentially, the way it was
five or ten years ago, I mean, five year ago. Despite all the
buzz, despite all the hype, cloud computing is a small part of
their market.

Jo Maitland: How about, I guess there has been some Twitter noise
about some of the executives over there. Are we hearing something
about a departure by somebody?

Carl Brooks: Yes, that is true. Steve Riley, Security Evangelist for AWS
has apparently fled the coop.

Jo Maitland: Wow.

Carl Brooks: It may be that he was frustrated with the somewhat
Draconian restrictions on PR, that Amazon imposes; they are very
hard to talk to sometimes. They are really, really careful about
controlling the message, which is not such a good thing when you
are trying to sell to people who deal with information for a
living. If you are talking to information professionals, and you
are not going to give them information, they are not going to
like that very much.

Steve was really part of the pitch to sell Amazon as secure
and enterprise-ready and aware of a lot of the problems that
an enterprise deals with when coming to an outside service
like Amazon, so the fact that he left may say that they are still
kind of missing the mark on that message. Definitely a big
departure for them though.

Jo Maitland: Yes. I think he definitely seemed to want to tell more of
the security story, and I got the feeling he was hamstrung, he was

Carl Brooks: Yes. The problem is you cannot tell a security story
without getting specific about it; nobody believes you. I think all these
guys are paranoid. You cannot simply say, 'Trust us,' it just does
not work that way. Steve is a great guy, there is absolutely no
doubt that he knew exactly what he was talking about, and he was
doing a fine job of informing and leading where they were going
with security, but if you cannot talk about it, it must be

Jo Maitland: It means nothing. Yes, exactly. Great. Thank you very much
Carl. This has been Cloud Cover. Thank you very much for watching, and
tune in next week for all the news on the Cloud computing market.
Thank you. Bye.

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