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Dell, IBM, HP Incomplete; Enterprise Buyers Replete with Amazon Web Services at $1 Billion in Revenue

In the product and investing world, $1 billion dollars is interesting.  Interesting markets draw new and existing companies. Derrick Harris of Gigaom believes Amazon’s latest filing indicates they will have exceeded $1 billion dollars in revenue for Amazon Web Services by year end. $1 billion dollars creates a lot of interest by existing and venture backed product companies.

The deluge of product offerings from existing and startup companies will only increase into 2012. Enterprise buyers must understand the interests of existing companies like Dell, HP and IBM, and the deficiencies of Telco’s. New entrants have a product enterprise buyers need to reduce costs and improve business agility. In cloud storage, new entrants like Mezeo, Nirvanix and Oxygen Cloud have the upper hand because reduced costs and business agility are the needs driving enterprise adoption of cloud storage.

Enterprise buyer needs are rooted in applications that create and manipulate content anywhere, anytime and from any device. Moreover, innovation through “Consumerization of IT (CoIT)” is driving enterprise users to consumer based applications.

Examples include content centric business workflow, and mobile device applications, such as Box, Dropbox, and Evernote. CoIT applications cannot make use of restrictive licensing and antiquated access constructs used by file systems, relational databases and/or content management from major players like EMC, IBM, Microsoft, NetApp, Oracle, etc.

Existing companies are concerned about existing revenues and margin erosion. The erosion is triggered by enterprise buyer’s application content and storage needs being independently met by the eight functional areas of Cloud Storage (See Amazon S3 has 187% CAGR; Enterprise Buyer priorities for Hybrid Cloud.)

Amazon Revenue Growth has AT&T, Dell, EMC, HP, IBM, Microsoft, NetApp, Rackspace, etc. Attention

IBM has chosen to go to market with Nirvanix and expand existing products’ like SONAS and Storwize V7000 with their Active Cloud Engine. NetApp hired HP IBRIX ex-CTO Sudhir Srinivasan, acquired Bycast, built a partnership with Cisco for servers and networking, and acquired LSI Engenio

EMC has favored Atmos, which runs on what looks like Dell R610 boxes, using JBOD arrays with Western Digital drives. However, EMC also has VMWare which acquired ZimbraZimbra is the technology foundation (:28seconds) for VMWareOctopus.

Dell and HP have both launched quasi competitive solutions to any Telco who wants to offer Cloud Storage and/or infrastructure in the cloud.  In all cases, these Cloud Storage products and business units are directly competitive to existing revenue generating groups.

Traditional storage and technology companies are protecting their current margin and revenues.  Their table stakes from the eight functional areas (covered in Amazon S3 has 187% CAGR; Enterprise Buyer priorities for Hybrid Cloud):

  • Storage Virtualization
  • Data Management
  • Multi-tenancy

If their products don’t control those areas, they risk revenue erosion on existing storage software and hardware. However, it is not just the storage business units at larger firms that are looking over their shoulder.

EMC Documentum, HP Autonomy, IBM FileNet and Microsoft SharePoint content management software will compete with REST API access from Cloud Storage. REST API access in cloud storage environments emulate common interfaces used by content management products.

Expect a disruptive REST API included in cloud storage products to be an enterprise license friendly version Content Management Interoperability Services (CMIS). CMIS is very similar in terms of API functionality to Amazon S3.

Moreover, CMIS is available on Alfresco, Apache Chemistry, Documentum, FileNet and Microsoft SharePoint. Expect Cloud Storage vendors to include CMIS in their REST API product offering in 2012. The ongoing disruption by cloud storage to business -as-usual is not limited to vendors. Telco’s have been shaken as well.

AT&T introduced a competitive storage service to Amazon in 2009 called AT&T Synaptic Storage. Verizon acquired Terremark in early 2011, and then CenturyLink acquired Savvis, Savvis owned the Cable and Wireless assets. These acquisitions signal more is coming in the Telco Cloud Storage space, but those acquisitions and existing products may not be sufficient.

Telco’s will require specific products to build a channel with the existing storage and services VAR, as well as keeping their current customers happy. Telco table stakes from the eight functional areas are:

  • Billing data
  • Multi-tenancy for customers and resellers
  • REST API access

In 2010, Telco’s were poised to take leadership in Cloud Storage, but they didn’t understand the integral role that VARs play in scaling cloud services revenue. On the other hand, companies like Dell, HP and IBM understand that VARs must be successful to scale cloud services revenues and equal

ly important, they understand how to work with them. Telco’s must begin supporting and operating within the VAR channel of traditional server and storage vendors.

Telco’s would like to sell cloud storage to the customers who purchase storage from VARs.  The VAR has the lens on those customer businesses that determines, if not defines the fit, for Cloud Storage. If Telco’s do not engage VARs, then companies like Dell, HP and IBM will begin winning in the space where VARs are recommending and reselling Cloud Storage.

In addition to VAR alignment, Telco’s face an equally compelling business challenge from consumers. Telco’s require cloud storage products to keep their internet, TV and telephone customers’ interest. If customers have content stored with their Internet and TV provider, they may be less likely to switch providers. However, consumer cloud storage products are orthogonal to nurturing a presence with VARs, thus Telcos continue to be pulled in opposite directions where cloud storage is concerned.

Hoe the Fertile Grounds of Cloud Storage

Regardless of your business – Telco, SMB/Enterprise or Information Technology Company, the success of Amazon must have your attention. While Amazon addresses all eight functional areas for cloud storage, they lack the ability to bring cloud storage software to an enterprise data center.  But, there are a handful of startups who capitalize on this shortcoming.
 
Mezeo, Nirvanix and Oxygen Cloud are new entrant companies taking a stand by offering software and services for the enterprise cloud storage software market. Each company offers products that can be installed on existing servers, leverages existing storage resources and expands vertically, horizontally and geographically.

Mezeo is the only vendor taking an approach that has garnered the attention of application developers and storage managers in recent years. Tucked away in their latest product release is a NOSQL system. In Mid-2011 Mezeo released version 4.0 of their product which included Basho’s Riak.

Riak is the system powering Mezeo’s scalability to levels at which EMC, HP, IBM, Microsoft and Oracle must take notice. The line of demarcation is clear; a scalable NOSQL database powering a cloud storage system is paramount when supporting these enterprise buyer functional areas:

  • REST API
  • Geo-capabilities
  • Data management and automated provisioning

Mezeo has addressed the eight functional areas critical to multiple customer requirements. Moreover, they have introduced a NOSQL infrastructure supporting global scale for content. Mezeo’s Cloud Storage Licensing and enterprise scalability should be more attractive than a relational database, traditional file system or a license restrictive content management system.

Regardless of your space – Fortune 1000 storage or application professional, Telco or Information Technology business development – you must start a conversation with Mezeo, or any company claiming to support the eight functional areas with an equivalent NOSQL based Hybrid Cloud Storage software product.

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Joshua L. Konkle

About Joshua L. Konkle

Vice President DCIG, LLC

Joshua Konkle is Vice President at DCIG LLC, an independent storage analyst and consulting firm. Mr. Konkle has been a business advisor with them since September 2006.

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