OpenStack:The next wave of disruption in the vendor cloud data center

OpenStack has grown and developed over the past 5 years, to the point where it is now generating serious attention from IT executives and developers around the world. While still a comparatively “young” technology, its potential is significant. The most obvious appeal of OpenStack is the open source nature of the platform, which gives users a level of customization that’s hard to match. In fact, it is this collaborative, community-oriented environment that will, potentially lead to an exponential growth curve as more and more users join in this trend.

With OpenStack, users have freedom without the fear of being locked in to one service and one set of hardware. This provides great freedom to users and enables them to explore a fuller range of options.

OpenStack is essentially an operating system for the hybrid cloud. It both augments and replaces existing proprietary infrastructure software, providing a standard mechanism for systems to operate across computing, network and storage. We believe that OpenStack will emerge as the winning approach primarily due to its open source heritage. Its concept leverages the ideas of hundreds of thousands of developers globally and prevents vendors from locking customers onto a single high-cost platform.

  1. Disruption Ah-ah moment: Low cost, high performance with low power consumption technology.
  2. Business opportunity: Enables to build and upgrade data centers, out sourcing data center with OpenStack.
  3. Controversy: OpenStack could disrupt key players like Cisco, Dell, HP and Juniper. There is a controversy around where there is no “best” option in how to build out your data center (build it yourself, all in one, out-source it on an open platform). Driving down price, reducing the barriers to entry for new startups, and commoditizing the data center. Obsoletes proprietary products.
  4. Opportunity for Entrepreneurs: For OpenStack, entrepreneurs can pick up the node they want to attack or build on (storage/compute/network).

OpenStack market to reach 3.3 billion by 2018. Storm Ventures recently gathered data around OpenStack startups and venture activity estimating the number of startups currently offering OpenStack related products at over 63. These companies have collectively raised approximately $1.8 billion from corporate and traditional venture investors. And these investors are already starting to see returns.

Interesting FACTs:

As we discussed in the class on Nebula, a once-hot startup co-founded in 2011 by an ex-NASA CTO, that has sold data center hardware for deploying the OpenStack open-source cloud software went out of business in 2013 even after securing $40M funding from top-tier VCs including Kleiner Perkins Caufield & Byers, SVB Capital, and Highland Capital Partners. Those VCs connections and experience weren’t enough to save Nebula or make it even vaguely viable.

The facts are pretty clear – Nebula failed to gain traction or differentiate itself, this despite the founder having some real credibility – Chris Kemp was, after all, one of the creators of OpenStack way back in the early days. Also founders at Nebula, believed that the market will likely take another several years to mature.

References

  1. https://www.openstack.org/blog/2014/10/openstack-startupventure-capital-ecosystem-its-real-and-coming-to-paris/
  2. https://venturebeat.com/2015/04/01/openstack-hardware-startup-nebula-shuts-down/
  3. http://www.businessinsider.com/openstack-startup-nebula-goes-out-of-business-2015-4
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