Born as a research project in the computer science department at UCSB, Eucalyptus the company was founded in January of 2009. Originally intended to replicate a subset of the Amazon cloud’s featureset in software that could be run locally, one of the project’s primary differentiators was its compatibility with the Amazon API. Importantly, however, this support was unofficial: Amazon neither supported nor legally blessed this feature. Which meant that its appeal was throttled by the uncertainty of Eucalyptus’ legal footing. More than one large vendor has privately characterized the Amazon API as a “non-starter” because their legal departments could not be assured of Amazon’s intent with respect to the intellectual property issues involved.
Meanwhile, a year and a half after Eucalyptus was commercialized, NASA and Rackspace jointly launched their own cloud project, OpenStack. While the initial versions were closer to a set of tools than the stack the name implies, OpenStack had an impressive partner roster at launch. And industry skepticism of the level of commitment of those partners has been offset with sustained momentum. Due in part to its more permissive licensing – OpenStack is Apache licensed, while Eucalyptus is reciprocally licensed under version 3 of the GPL – the NASA/Rackspace effort has enjoyed wide corporate interest and support. From AT&T to Dell to HP, OpenStack’s traction has been such that even skeptics like IBM and Red Hat have lately appeared to be moving towards acceptance of the project.
For all of OpenStack’s momentum, however, Amazon remains the dominant player in public cloud, with one researcher estimating its datacenter size at just shy of a half a million servers. Amazon itself has validated external estimates of its growth trajectory, saying (PDF) “Every day Amazon Web Services adds enough new capacity to support all of Amazon.com’s global infrastructure through the company’s first 5 years, when it was a $2.76 billion annual revenue enterprise.”
The question facing Amazon was if, or perhaps when, interest in on premise functionality would become sufficient to incent its participation – whether through build or a partnership – in private cloud solutions. The answer to that question appears to be this year. In January, the retailer turned technology giant announced the availability of the Amazon Storage Gateway, a virtual machine run locally that bridges data to Amazon’s storage service, S3. And then this morning, Amazon announced a partnership with Eucalyptus. As Om Malik put it, “On paper it looks like one of those strategic agreements that large companies sign-up with small startups,” but the announcement belies the larger significance. Amazon is, for the first time, playing the intellectual property trump card it has been holding in reserve.
By strategically and selectively removing the uncertainty regarding its APIs, Amazon gains literally overnight a credible private cloud offering, minimizing that as an angle of attack for competitors who might otherwise attempt to sell against Amazon by emphasizing its public cloud-only technology story. Nor does it have to deviate from its public cloud orientation by creating a more traditional software organization. This deal instead effectively outsources that to Eucalyptus.
Eucalyptus, for its part, may now realize the full potential of its differentiated access to Amazon public clouds. As Amazon’s only approved platform, it can expect its attach rate within organizations consuming Amazon cloud resources to improve substantially. While the deal is apparently not exclusive, OpenStack is not likely to either ask for or receive the same blessing from Amazon that Eucalyptus received. Assuming that the API licensing would survive a transaction, Eucalyptus has with this announcement substantially increased its valuation. The success of one organization is the success of the other; wider Eucalyptus adoption poses no risk to Amazon’s growth, while its success would push Amazon’s APIs closer to becoming the de facto standards of the public cloud.
From a landscape perspective, this cements the perception that it’s Amazon and Eucalyptus versus OpenStack and everyone who’s not Amazon, with the notable exceptions of Joyent, Microsoft and VMware, each of whom owns and sells their own cloud stack. In general, betters would be best advised to take the field over any single vendor, but the cloud market is an exception: Amazon is that dominant. By virtue of being first to market as well as executing consistently for six years, Amazon made itself into the proverbial 600 pound gorilla in one of the most strategic markets in existence. If you’re going to pick sides, as Eucalyptus did more emphatically this morning, that’s not a bad choice to make.
Disclosure: Dell, Eucalyptus, Joyent, HP, IBM, Microsoft, Red Hat and VMware are RedMonk customers. Amazon is not a RedMonk customer.
