Citrix announced the acquisition of Cloud.com this morning hoping to flesh out its long-running cloud road-map. This Brief Note covers what this means for Citrix and provides some background.
There’s some clear motivations for Citrix:
- Filling whitespace – Citrix has long spoken about cloud computing, but they’ve yet to make a big splash on the overall scene. By purchasing Cloud.com, Citrix might be able to finally fill in the potential they’ve been marketecting for themselves over recent years.
- Move from call centers to cloud – In the long term, Citrix needs to come up with new lines of business around virtualization and cloud computing to replace (or supplement) the “cash cow” of its legacy, desktop business. That BU could be revitalized if the whole idea of virtualized desktops takes off, but that’s been rocky when it comes to blow-out acceptance.
- As real a deal as you’ll find – Cloud.com is regarded as one of the more “real” cloud offerings out there, building a respectable story over the short years they’ve been around. They’ve built up a nice list of public references out of 65 reported customers overall, including KT, a large public cloud project that most every serious cloud player is currently involved with (you hear all sorts of things good and bad about it, sure, but it provides an ongoing test of this whole “cloud” idea beyond Amazon).
The Citrix Context
If you’re like most people I talk with, you’re probably like, “Citrix…?” Indeed! Citrix is one of those under-appreciate, billion dollar companies. They started out with technology to host desktops on servers (think thin clients and call centers) and with their purchase of XenSource some years ago have been expanding into general IT management and, now, cloud. One of their core assets (and liabilities, the tin-foil hats would say, when it comes to portfolio expansion) is a long-standing, bi-directionally beneficial relationship with Microsoft (needed to make their thin client technology extra, super-magical).
Here’s their revenue by business unit since 2009, the red line is the virtualization and cloud gaggle:
How good is Citrix at capitalizing on acquisitions? It’s difficult to track what they’ve done with XenServer exactly, but it seems like they’ve done well. The Xen brand certainly took over most of Citrix, but because they bundle their NetScaler product line together with XenServer, you can’t perfectly track revenue for the “Data Center and Cloud Solutions” business unit. (And, indeed, NetScaler seems to have “lead” revenue for this BU in the most recent quarter). But, hey, when has tracking product line revenue ever been easy from the outside?
Last year the Data Center and Cloud Solutions BU reported $298.6 in revenue (up from $231.4M in 2009). As the chart below shows, it’s still a smaller part of overall company revenue, and smaller than the Citrix Online BU (home of GoToMeeting and other GoTo products):
As some rough comparisons: VMware brought in $844 million company-wide in the last quarter of 2010 and $2.9 Billion for all of 2010, most of that, no doubt, around virtualization and “data center management” – the Spring revenue is probably small compared to the overall VMW cash-pie. And when it comes to market share, I continue to see numbers that show VMware far in the lead, by large margins, with Microsoft’s Hyper-V a distant second, and Xen third, down there with the other hyper-visors.
But, with Gartner reckoning that “at least 40%” of x86 machines are virtualized, just to pick one estimate out of many, there’s all sort of room to close those gaps.
One thing is certain: Citrix has yet finished its cloud strategy over the years. Their CEO, Mark Templeton is extremely charismatic and along with the recently departed Simon Crosby (check out his note on the Cloud.com buy) can talk a good vision on cloud. Their presence in cloud, despite all that Xen-driven cloud, hasn’t been as much as it should be. Hopefully, the Cloud.com team (who seems to be taking a leadership role) can help accelerate that.
Back to Cloud.com
Cloud.com has a few things going for it: based on their momentum, their software seems to work, which is saying a lot for something as new as cloud computing. Many of the “real cloud” projects out there require a tremendous amount of what we used to call Systems Integration (now “cloud integration”?) work to make up for immature software. From what I’ve heard, Cloud.com seems to be suitably functional for its age.
The other thing that they’ve wisely done (and, I hope, will continue to do) is set a course for merging with OpenStack. I’m not too sure what that will mean, but the overall community around OpenStack is looking hopeful. And, again, while OpenStack isn’t “done” yet, the progress they’re making, so far, is encouraging. Several, though by no means all, large, customer rich, vendors are looking around for cloud stacks to standardize on and the short list is often coming up at VMware, OpenStack (once it gets out of the oven), and one or two more. In that context, aligning itself with OpenStack, in the road-map sense, probably gives Cloud.com a larger future than it’d have if it was still a cloud island.
Those comments still apply – indeed, I only hear more about (mostly vendor) desire to move to OpenStack, if only as the “other” next to VMware in private cloud. What I’d look for from Citrix is simply adding gas to the fire, as it were. From their comments, Citrix is all over the OpenStack angle, so I would expect Cloud.com to continue “merging” with OpenStack. As some of the press release text says, “Citrix will accelerate its support of OpenStack.”
On the developer front, Amazon still rules and I rarely hear anything about “private cloud” (this is developers, not IT folks). One of the keys to developer-driven cloud adoption is quickly slotting yourself into the cloud development tool-chain. The lunatic fringe (those developers I pay the most attention to) has been going on about how it’s all “culture” and not “technology,” and while I have sympathy with that argument, I’ve been seeing a pretty consistent, if wiggly, tool-chain adopted by developers. Someone like Citrix+Cloud.com (and all the other Elder Companies buying gel to slick up their hair) needs to get into that tool-chain or, if you’re the likes of VMware/SpringSource, build your own from an existing mega-community.
The bottom line is that everything is still very early in the cloud market: few people are delivering it, there’s still a lot of plain old virtualization left, and we still can’t even figure out if public or private cloud is “better.” Now is still a good time to try and get a foot in the door before someone comes along with an axe.
As disclosed below, Cloud.com is a client, and has been for a few years. Their man in marketing, Peder Ulander has been a friend of RedMonk for sometime now, as has Mark Hinkle. Congrats to the whole team for completing the first major goal of startups, an exit.
- For more on the ongoing OpenStack world, check out my recent Quick Analysis of the evolving ecosystem.
- Klint covers it for RWW.
- Gavin Clark writes up up for The Register with an estimate of Cloud.com’s price: $500M, while John Kennedy puts it between $200M and $250M.
- Krishnan Subramanian does a good job wrapping up the “what’s it mean for the other guys” and adding in his own, overall analysis.
- Ben Kepes write it up, mentioning the service provider/telco market angle: “With this acquisition, Citrix is greedily eyeing the lucrative service provide market and hopes to replicate the sort of deals that cloud.com has done with he likes of Tata, Korea Telecom and others to build their own public cloud services.”
- One of the Cloud.com VCs writes it up and mentions the existing cloud challenges/opportunities.
Disclosure: Cloud.com is a client, as is VMware and Microsoft. See the RedMonk client list for related folks.