Data-driven

I ended my last blog post with "Integrate and prosper." Little did I know that Cisco, EMC, and VMware were about to unveil a Virtual Computing Environment (VCE) early the following week, the biggest cross-vendor integration project yet seen in the world of computing. Yes there were rumors about a Cisco/EMC joint venture that would sell Cisco servers packaged with EMC storage, but none that I heard captured the boldness and scope of VCE.

The core VCE compute platform is called a "Vblock," an integrated, pre-packaged IT solution consisting of server and networking resources from Cisco; storage, security, and software-based management tools from EMC; and an OS platform (vSphere) from VMware. To market and support Vblocks, the coalition has created two separate entities: a Solution Support Team staffed and funded by the coalition partners that will do presales and provide other marketing resources, and Acadia chartered to build and, if needed, operate Vblocks on premises for a customer. Who will you buy Vblocks from? Just about everyone except HP, IBM, and OracleSun.

Not to be outdone, the day following the VCE announcement, HP announced Converged Infrastructure (CI). CI is integrated server, networking, and storage resources too, but doesn't need a coalition. It takes most of what it needs from HP's own product lines. I say most because HP doesn't own a server virtualization platform--a key ingredient. Not to worry. Despite the fact that VMware is invested in Vblocks and Acadia, it likes CI too. And then of course there's the HyperV alternative out there...somewhere...

Its decidedly unclear at this point how successful these integrated compute stacks will be in an IT marketplace that's undergoing multiple transitions--from physical to virtual, from stove pipe to cloud, from decentralized to consolidated. The purveyors of integrated compute stacks are driven by a central belief: that your CIO wants to make the transition to virtual/cloud/consolidated simpler by wrapping up servers, switches, and storage arrays into one neat, pre-integrated package.

As storage pro, you may find that ironic. You may be old enough to remember when many of these same vendors were selling decentralized client server computing as the better, simpler way. Now the Three Musketeers--consolidation, centralization, and virtualization--are here to vanquish the complexity created by the-network-is-the-computer computing. Please shoot me if I even suggest that integrated compute stacks are the new mainframe.

So, as a storage professional slaving away within the bowels of corporate IT infrastructure, is the integrated compute stack about to change your life? I'd say yes if the powers that be like the Vblock concept. And if they like Vblocks then your choice of storage is EMC's. If CI wins, you get HP's flavor of the month array. Simple, right? And life could get simpler still when the IT operations group reorganizes around Vblocks. You may get to know the people in the server and network administration groups much better than you know them now as they start doing some of the things you do.

On the other hand, Vblocks and CIs may well be a tough sell in your organization. Cisco has yet to make its mark in the server world and buying a million-dollar anything from a coalition of vendors that want to run your critical applications on their collaborative platform is untried to say the least. But the biggest hurdle standing in the way of the integrated compute stack as it approaches your IT operations group may well be the following retort: "We just don't do things that way here."

I responded recently to an e-mail from a good friend who works for one of the big database applications vendors. He wrote me expressing discomfort and dismay over hype that swirls around cloud computing. He pointed out that no one vendor had yet put forth a full-scale vision for a shared-responsibility, open-access "cloud." He went on further to say that vendors wouldn't know how they would make money if a true open-access cloud were to come along.

My response was that the appeal of the "plug in, turn on, get IT service" mantra is compelling in an economy that forces companies to look away from capital acquisition in favor of off-balance sheet methods like leasing and the cloud "pay-as-you-go" model. Users will be drawn to both compute and storage clouds and vendors will want to sell them clouds and/or cloud infrastructure stuff. Concern over whether they are "open" has yet to put the brakes on this accelerating force. But there is growing concern among users about cloud vendor lock-in.

Amazon S3's application programming interface is the defacto standard for storage clouds--a fact that neither Amazon nor storage cloud user communities seem to mind much at the moment. Nonetheless, there is now a collaborative effort dedicated to furthering the adoption of cloud standards, storage and otherwise.

Openness aside, there are a number of assumptions floating around about storage clouds that have yet to be tested. These are assumptions like infinite scalability, unlimited availability, and increased responsiveness. Nothing in computing is infinitely scalable. There have been and will continue to be storage cloud outages. Response times are not deterministic. And nobody seems to be really talking about security all that much, let alone legal issues surrounding personal data in the cloud, SEC and other compliance issues, and potential chain of custody issues.

The biggest concern I have right now is for independent cloud storage vendors, particularly some of the small but rapidly growing start-ups. At CloudCamp Boston, someone provocatively mentioned that compute clouds commoditize IT operations. Interesting observation. One could argue that IT operational commoditization at least started when the help desk went overseas. But let's push that thought forward a bit more with regard to the storage cloud.

Amazon's S3 service was carved out of an existing IT operation that supports a different core business--retail. In essence what Amazon did originally was to monetize both spare capacity and the operational support staff which presumably was already being paid for by the retail side of the house. Is Amazon the sole owner of a secret formula that turns internal storage into cloud storage gold? No. Any reasonably large IT shop with an entrepreneurial bent could do the same.

Enron (remember Enron, the energy company?) was once a storage service provider (SSP), but not like their many SSP rivals at the time. Enron wanted to create an arbitrage opportunity around the excess capacity held by their SSP contemporaries. They proposed to buy and sell storage capacity in the same way they were buying and selling energy at the time--as a fungible commodity. Yes, Enron believed that storage sitting on a raised floor inside a data center or a co-lo was fungible.

Too bad for the smartest guys in the room. They were about eight years too early. It took an Amazon to prove that storage is indeed fungible. Could other big retailers do an S3 equivalent? Why not? There's nothing really stopping them. And why not financial services firms? Manufacturers? This list goes on. Nothing stopping them either. And I believe we will soon see brokers of cloud services in the same way we saw brokers of time-sharing services back in the day of the mainframe.

Hybrid clouds--ones that are both internal and external to the enterprise--will eventually dominate. There is no reason why a large internal IT services provider couldn't do what Amazon is doing, namely partition-off some idle capacity and offer it up to a cloud-based services consortium (the "open" cloud?) for a fee. Huge investments in computing and communications infrastructure have already been made. We will see an open cloud for example when a group of entrepreneurial IT executives form a consortium that offers utility cloud-computing services. These will not only be open, but their services will be priced to market. I hesitate to say "commodity" but that's where I think utility cloud services are going.

I believe it will happen this way because a historical precedent has already been set. Remember the old mainframe time share days? When IT represents a significant investment to the enterprise, IT executives look to maximizing its efficiency. One of the ways they did this back in the day was to offer up idle mainframe compute cycles for sale. They sold cycles decades ago. Today they can sell compute cycles, storage capacity, and the operations staff to manage it, all delivered over the wire. Amazon isn't the first, nor will they be the one and only.

This economy will force big enterprise IT to look at replicating the Amazon EC2/S3 model for two reasons:

1. Amazon can deliver IT services more cheaply than most large enterprise IT departments so the IT executives managing large IT shops will want some of what Amazon is smoking. They'll imitate the infrastructure. They'll buy cloud services. They'll sell cloud services.

2. Amazon has proven it can make money off its idle compute capacity. Every IT shop runs through computing peaks and valleys. Why not sell the idle capacity during the off-peak times just like Amazon. An "open" cloud would allow them to do this.

In the end, computing vendors make money from clouds by selling the underlying infrastructure. Enterprises make money from clouds by selling access to idle infrastructure offered up to the "open" cloud. Brokers of cloud-computing services make money by inserting themselves in between the buyers and sellers of cloud-computing resources. And, all of the foregoing means that the independent cloud services providers will live in an increasingly commoditized world where the price of the commodity is set not by those selling services as a core business, but by those selling cloud services as an adjunct to their core businesses.

That in my mind is the threat that the smaller independents may or may not see coming. As an independent, having an application wrapped around a cloud infrastructure is one way to forge a more sustainable cloud business model.

The Data Domain thrill ride ended this week when EMC upped its offer for DDUP to $33 per share (a whopping $2.1 billion dollars, or 111 times Data Domain's earnings), after which NetApp bailed out and went home.

Then came another surprise. Broadcom dropped its hostile takeover bid for Emulex--a prize it had been chasing for months. Hostile is almost an understatement for Emulex's reaction to Broadcom's entreaties. Harsh words and lawsuits were flying back and forth. But that one ended too when Emulex's board of directors unanimously rejected Broadcom's sweetened bid of $11 per share. Not even close to what we're worth, said Emulex. For Broadcom, this rejection was the final act.

Think we're done now for 2009? I think not. Stay tuned, because the storage industry has become a cauldron of acquisition activity. Yes NetApp lost its bid for Data Domain, but is likely not out of the hunt, if it wants to try again--for instance, other dedupe technology sources include ExaGrid, FalconStor, Quantum, and Sepaton. Nor can we say that Broadcom has suddenly lost interest in getting to the Fibre Channel over Ethernet "Go" square sooner rather than later just because they were stiff-armed by Emulex. There are other FCoE processing stacks out there to be had--via an acquisition of QLogic, for example. In other words, those were just warm-up events.

Joe Tucci, chairman, president, and CEO of EMC, has proven over the years to be a master of the technology acquisition, so whatever he's watching, I'm watching. More than a year ago I was at an EMC World event at which Tucci spent some quiet time with a gathering of industry analysts like me. He can be surprisingly candid in these sessions. During this one he disclosed that he was closely watching four technology areas he thought would produce significant heat within the next few years: virtualization, data deduplication, solid-state disk, and cloud computing. Now it looks like he was right on all four out of four.

The first one, virtualization, was no real surprise. He'd already acquired VMware, by far the brightest star in the virtualization firmament, and he bought it for what now appears to be a $635 million song. So EMC now owns the big server virtualization franchise, but what about storage virtualization? EMC really doesn't have that square covered yet, and rivals like HDS, IBM, and NetApp are pecking away at EMC's potential clout in this space. Will Tucci turn up the heat on internal development, or get out the checkbook? Hard to say, but FalconStor for example is potentially available; it should be remembered that FalconStor was once a storage virtualization play before it found a secure niche in data deduplication.

Speaking of which, the second area, data deduplication, was a bit of a surprise in that dedupe feels more like a feature than a product. Furthermore, EMC makes big money on storage, and deduplication makes big storage smaller. Why would EMC want to go there? No matter. EMC is about to pay billions of dollars for a company that sells disk-based data protection appliances competitively against EMC. Dedupe is the prize inside because, as a feature, data duplication can go just about anywhere--it's applicable to primary, backup, and archive storage--and it actually induces buyers to take on more disk and less tape. Clearly, Tucci wants EMC to own the dedupe opportunity (and DDUP for that matter) wherever it goes. Competitors will take note and respond. Given the current economy, storage efficiency is now the rage, and M&A activity around dedupe is far from over.

Solid-state disk was a big surprise at the time. SSD arrays once kicked around big data centers years ago, but never got a firm foothold. Moreover, in those bygone days of the early 1990s, EMC actually had an SSD array that it killed off when its Symmetrix disk array sales took off. Now solid state is back on EMC's radar screen because finally, and as a result of the ubiquity of NAND flash memory, it can be bought at a price point that compares favorably with rotating disk for applications that demand performance. Finally, SSD is hot. The companies potentially in play here are not the makers of NAND flash (like Intel and Samsung). The hot start-ups to watch are the developers of SSD controller technologies ( Fusion-io and WhipTail Technologies for example)--that is, the people who take the NAND flash and actually do something with it. The real work of managing NAND flash and presenting it as disk to an operating system gets done at the SSD controller level, and if Tucci is watching this space closely, he's not alone.

Seeing cloud storage on the list was once again a big surprise. That's another place the storage industry has once before gone and failed. We remember from the Web 1.0 era the meteoric rise and fall of many Internet-based storage service providers like Storage Networks and StorageWay. Even Enron had a horse in this race. But that, as it turns out, was cloud storage 1.0. Cloud storage 2.0 is big and growing, and again Tucci has proven himself to be on the mark. Indeed, EMC has already made an acquisition here--Mozy, once a cloud-based data backup service that now anchors EMC's Decho. EMC is also actively developing and marketing a cloud storage platform called Atmos, and has recently introduced Atmos onLine. Does EMC need more cloud storage? Only time will tell. And even if Tucci doesn't see a need, his competitors will. The potential cloud storage acquisition targets are many and varied, from cloud storage service plays like Nirvanix to cloud storage software plays like ParaScale.

With Broadcom's shadow away from its doorstep, Emulex now gets to prove that it really can spin FCoE chips into gold on its own. And while Data Domain didn't wind up with the suitor it wanted, Tucci is working hard at making DDUPers welcome in Hopkinton, Mass. Is that all for storage industry M&A activity this year? Not by a long shot.