As important as it is to see who wins here, it’s also important to see who might lose out from this decision.
The biggest losers have to be those companies that are depending on alternative cloud infrastructures, beyond those deployed by Amazon.com and IBM’s OpenStack friends.
This means, first, Google. Google Compute Engine has followed Amazon’s price cuts, but has yet to gain significant share because Amazon was so far ahead of it in going after the public cloud market.
Google has grown increasingly serious in the cloud market lately, making its cloud more secure and bringing in resellers such as Rightscale. It’s also important to note that only Google can probably meet Amazon on costs right now, and that since Amazon depends heavily on a single center, in Virginia, Google can offer the kind of redundancy and geographic dispersion multinationals should start demanding.
But this can’t be good. Google is no more likely than Amazon to book big cloud service profits any time soon, and as private clouds come into their own its incompatibility with OpenStack will become, increasingly, a second strike against it.
A second big loser is Salesforce.com. Salesforce sells its software as a service, deployed on Oracle services, and it calls that a cloud. But it’s not really a cloud, although it is the end product of cloud. It calls its cloud infrastructure Force, naturally, and it’s tough to see Force becoming compatible with anything – OpenStack, Google Compute Engine, or Amazon.
Thus as cloud becomes mainstream, Salesforce could become increasingly isolated. While CEO Marc Benioff may be steamed at reading this, I think the company’s best long-term option might be an acquisition by Oracle itself. You can hope for that to happen, or you can watch CRM run into the brick wall of mass market cloud with an incompatible offering – neither choice is great.
Survival and a Foolish Play
As important as this decision is for the companies previously mentioned, there are some companies for whom this decision by IBM means corporate life itself.
Gartner Group estimates the public cloud market for 2013 at $131 billion, so there are going to be lots of winners, and lots of survivors, as the market continues to develop at the roughly 20%/year clip it has been enjoying.
This means that Hewlett-Packard (NYSE:HPQ) and Dell, which have been building their own clouds on OpenStack, may yet turn out to be survivors. With Dell in the process of going private, investors will find they may actually have a reason to take a flyer on HP.
IBM’s decision means that HP’s longer-term strategy of going with OpenStack is sound. If you believe in the rest of Meg Whitman’s turnaround story (I don’t) you may find HP to be dirt cheap at these levels, and a great way to rise to the top of the cloud market.
By committing to the same software platform used by many other companies, IBM puts itself in a leadership position, and makes itself the “big dog” in the fight against dependence on Amazon.com. It will have a lot of frenemies in this – friendly adversaries – for contracts, but it has decided it needs their heft in order to make progress.
My Foolish take on the cloud remains what it has been. I’d love to get back into Amazon, but not at these levels. I’m currently invested in both IBM and Red Hat, and have a small stake in Google for reasons that go well beyond public cloud. I don’t have to play the whole cloud to make a tidy cloud profit, and this is where I choose to stand.
The article How to Profit from IBM’s Cloud Announcement originally appeared on Fool.com.
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