April 10, 2008
Amazon, better known for peddling books and CDs than selling leading-edge technology, surprised much of the tech world by rolling out, and actually attracting customers to, its version of cloud computing. Sure, there's still plenty of reason to be skeptical -- indeed, cloud computing is one of those technologies that can sound more like a buzzword than a solution to real-world IT problems -- but other players are jumping into the game.
And that's good news for business. Competition will force vendors to keep prices low, improve the technology, and, more importantly, prove once and for all whether cloud computing is more than, well, pie in the sky.
Earlier this week Google launched App Engine, a service to host Web applications. Google App Engine is still in diapers; at the moment, it only supports applications written in Python and only has room for 10,000 developers to use the service. But it's likely to grow. IBM's Blue Cloud will go live later this year, though it's more geared to selling tools to build clouds than to hosting them, and Salesforce.com is beginning to position itself as a cloud vendor with Force.com.
Who's next? EMC.
"We will compete with Amazon," says Joe Tucci, the storage giant's CEO. "There will be an EMC storage cloud; in fact, there already is," he said during a meeting with a small group of reporters at the RSA conference in San Francisco.
EMC's bid for the cloud
When Tucci said that EMC has a storage cloud, he was referring to Mozy, the company's online backup and recovery service, acquired in the buyout of Berkeley Data Systems. Tucci's ambitions go far beyond simple, online backup. "Big companies can't do small things. If I don't see a $1 billion business, I don't go into it," he said.
Like Amazon, EMC's cloud will include both storage and computing resources. The timing of the offering isn't clear, but Tucci, who has broadened EMC's capabilities by buying 37 or so software, document management, and security companies, isn't given to vaporware pronouncements.
EMC's cloud play will focus on businesses through its computing and storage offerings, but the company sees an opening on the consumer front as well.
Driven by the bottomless well of content produced at home by digital cameras, MP3 players, and DVRs, a typical consumer may well have as much as a terabyte to manage before too long.
"If I'm a consumer, I'd rather trust EMC to [secure] my data than myself," says Art Coviello, who manages EMC's security business. That may well be true, but won't IT execs, skittish about losing control of their own data and resources, be a harder sell?
"It's not as if you don't have outsourcing today; it's not as if you don't have a Salesforce.com today," replies Coviello. Fair enough, but rightly or wrongly, many IT execs view those strategies as much less radical than cloud computing.
And remember, we're not just talking about parking data; it has to be securely accessible to a variety of employees, partners, and, in some cases, customers.
Earlier this year, I spoke to Doug Menefee, CIO of the Schumacher Group, which finds temporary staffing for hospital emergency rooms across the country. Menefee is an early, and generally happy, adopter of Salesforce's cloud technology, but he's quick to say, "Single sign-on service and password management were the biggest pain points."
With all due respect to EMC’s execs, it surprised me that they weren’t more specific in their discussion of security risks in the cloud. Tucci acknowledged that IT managers may well keep the most sensitive data at home and out of the cloud, and said “there’s no reason why we can’t create a secure cloud.” That’s nice, but I’d like to hear more. Similarly, Coviello, who has a very thorough knowledge of the threat landscape, was awfully casual, if not dismissive, in answer to questions about the risk to data, saying “I’d never suggest there is a perfect security system.”
I’m not suggesting that EMC doesn’t care about security. Far from it. But making the cloud acceptable to big-time IT is going to take some serious, and very concrete, thinking.
Security aside, there's another business opportunity here as well -- selling hardware and software to enterprises big enough to build and manage their own clouds. That's exactly what IBM will be doing via Blue Cloud, and Tucci figures that EMC will partner with customers in financial services and other big verticals to do that as well.
The move to cloud computing is obviously gaining some traction, but more than one "next big thing" fell flat when it failed the test of real-world use. I'm not making any predictions here, but keeping an eye on this nascent trend is likely a good idea for investors as well as serious consumers of technology.
(Disclosure: I own a small number of shares in EMC)
I welcome your comments, tips and suggestions. Reach me at bill_snyder@infoworld.com.
Posted by Bill Snyder on April 10, 2008 03:00 AM
January 21, 2008
EMC has never been shy about straying from its core business of enterprise and network storage. It jumped into virtualization via the purchase of VMware and moved into document management when it took over Documentum.
The results have been good. In its most recent reported quarter software license and maintenance revenue increased 25% year-over-year and accounted for 41% of revenue.
Now EMC is hopping to leverage last fall’s $76 million purchase of Berkeley Data Systems into a seat at the SaaS table.
As of Tuesday, EMC is offering an online backup and recovery service based on Berkeley’s Mozy technology. EMC is already managing 5 petabytes of Mozy storage at two centers in Utah, for more than 500,000 devices. Most Mozy customers are smaller businesses and even consumers, with the notable exception of GE, which uses the services to back up data from thousands of notebooks, desktops and remote servers.
Since Mozy customers pay by the byte via a monthly subscription, and since the data is housed remotely in a multi-tenant infrastructure, EMC is now playing the role of service provider. Indeed, the company has just created a new business unit to handle its SaaS business, and MozyEnterprise, as the new service is called, is the unit’s first product.
EMC’s SaaS roadmap is not altogether clear, at least for public consumption, but in an interview shortly before the news was announced, Roy Sanford, VP of marketing for the new unit, gave some pretty broad hints. Customers, he said, have asked for SaaS-enabled offerings in security, compliance, content management and email. Expect to see more offerings from the new unit later this year, he said.
The Mozy offering itself doesn’t strike me as all that exciting, and I doubt that it will have much of an impact on the company’s top and bottom lines, at least in the short run. But the fact that EMC is moving into SaaS speaks volumes about the rapid pace of change in the software business and EMC’s determination to find new areas for growth.
Why is EMC moving towards SaaS? Customers have asked for it, says Sanford, and the technology, which wasn’t robust enough to support the old ASP model, is now ready for primetime. It expands EMC’s addressable market into the SMB and consumer spaces, and will provide a relatively predictable revenue stream.
It will be interesting to see how EMC deals with consumers, a pesky and sometimes expensive customer set, and to see if events bear out Sanford’s contention that MozyEnterprise won’t cannibalize existing EMC sales. It won’t, he says, because Mozy did not and will not include data center backup, a big part of EMC core business.
(Disclosure: I have a small position in EMC.)
I welcome your comments, tips and suggestions. Reach me at bill_snyder@infoworld.com
Posted by Bill Snyder on January 21, 2008 10:34 PM
November 15, 2007
Don't Get Caught in the Stampede
Apple and VMware took the rap when Cisco's warning and Oracle's virtualization announcement panicked tech investors. That was a mistake.
Don't think the market is always rational. Investors, even smart ones, can get caught up in the day's news and the resulting emotion. At times, that results in wildly overinflated prices for companies that have no chance of long-term success; remember the outfit that was going to make a fortune delivering kitty litter online?
At other times, the market overcorrects the other way. A spate of bad news makes investors nervous, and suddenly everyone is looking for an excuse to run for the exits. That's what happened last week. With all sorts of bad macro news -- the continuing market meltdown, rising oil prices and the limp dollar -- investors had reason to be nervous.
Then came Cisco's first-quarter earnings call.
In fact, it was a very strong three months. First-quarter revenue was $9.6 billion, up nearly 17 percent from $8.2 billion in last year's first quarter. Net income rose more than 37 percent to $2.2 billion from $1.6 billion a year earlier. Earnings per share were $0.35, up from $0.26 in last year's first quarter. What's wrong with that? Sales to the U.S. financial sector were weaker than expected.
Investors took that as a very negative signal, and to be fair there was certainly reason. But one of the companies that took a major hit was Apple. Say what? Of all the major computer companies, Apple has the least exposure to enterprise sales, and its consumer business, headlined by the iPhone and the iPod, is terrific.
Part of the reason for the slide: momentum players. These are hedge funds and other institutions that trade directionally over the short run. When a stock moves down, short sellers can get into the game, and suddenly the stock is really tumbling. That in turn upsets the broader market, particularly retail (Wall Street lingo for Mom and Pop) investors who sell.
Apple recovered nicely on Tuesday, along with the broader market, and got a big boost from news of strong iPhone sales in the U.K. and a possible big deal in China.
Meanwhile, Oracle kicked off OpenWorld with an announcement that it was jumping on the virtualization train.
Kaboom went shares of VMware. Investors with positions in VMware and EMC, which owns most of VMware, freaked. VMware, the hottest IPO of the year, had been sliding anyway. But the Oracle news got it tumbling.
Interestingly, there are a lot of questions about what Oracle is really going to do about virtualization. Benchmark analyst Brent Williams put it this way: "We believe a product likely to add de minimis revenue to Oracle's deal size is unlikely to attract significant attention from Oracle's sales force, and thus is unlikely to be featured in significant numbers of deals."
Similarly, Citi analyst Brent Thill said in a note to clients: "Oracle's announcement to offer and support their own flavor of the Xen open source hypervisor does not affect VMW's position as the
de facto standard in server virtualization. Xen, as an open source project, is already freely available on the web or through other vendors. VMware's own base hypervisor technology, VMware Server, is available as a free download."
The Benchmark analyst noted something that struck me right away: The virtualization announcement is reminiscent of the big splash Oracle made with "Unbreakable Linux," a splash that temporarily swamped the share price of Red Hat. As it turns out, "Unbreakable Linux" isn't much of a factor in the market at all.
That's not to say Oracle won't make headway in virtualization. But not right away. Meanwhile, VMware's release of Server 2, its free virtualization product, is getting rave reviews.
So, morning-after thoughts by analysts, plus the Server 2 release, turned VMware around.
The bottom line: There's obviously reason to worry about the strength of tech sales going forward, but take a deep breath and look closely before you sell. Indeed, the dip in VMware's value might well have been an opportunity to buy some shares at a nice discount. (In fact, I did that very thing, and now hold a small position in VMware.)
I welcome your comments, tips and suggestions. Reach me at bill.snyder@sbcglobal.net
Posted by Bill Snyder on November 15, 2007 03:00 AM
September 24, 2007
Not everyone was impressed when EMC bought VMware in 2004. A lot of people on Wall Street had problems understanding why an old-line storage giant would want to play in the highly specialized virtualization arena. Those days are over. Not only has VMware turned into the hottest tech IPO of the year, the high tide is also lifting EMC’s boat (remember EMC still owns a majority stake in VMware).
On Monday, a gaggle of Wall Street analysts published bullish notes on EMC, most mentioning that VMware is really the apple (no pun intended) of their eye. As a result, EMC’s long-suffering investors got quite a boost as shares jumped $1.48 or nearly 8% to close at a new 52-week high of $20.51.
Citigroup analyst Paul Mansky upgraded EMC to a buy saying that the long terms benefits of associating with virtualization “are compelling” for EMC, while Bear Stearns analyst Andrew Neff called EMC "a low-cost way to play VMware.”
In case you hadn’t noticed, shares of VMware have roughly tripled since coming out the gate during the summer and there’s some feeling on Wall Street that they might be a little rich. Therefore, buying EMC is seen as a bargain-basement bet on VMware.
Despite the inevitable increase in competition, VMware still holds a better than 80% share of its market and recently reported an 83% jump in revenue in the first six months of the year.
EMC has not been a favorite of investors, but Neff made a point of praising the company as a whole: “From a larger perspective, we see EMC as more than just a storage play: We also see that EMC management has been adept at finding the 'next big thing' in IT spending [high-end and mid-range storage, software] and growing those nascent businesses, enabling overall EMC to continue to grow," he said in a note to clients.
Indeed, I bought (a modest number) of EMC shares a while ago for exactly those reasons.
You can read and hear a lot more about virtualization by checking out our special report, Vitualization on the Front Lines.
I welcome your comments, tips and ideas; reach me at bill.snyder@sbcglobal.net
Posted by Bill Snyder on September 24, 2007 04:09 PM
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