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HP Buys Cloud Vendor Eucalyptus

The deal may signal a big shift in HP's cloud strategy

• By Jeffrey Schwartz
• 09/12/2014

Hewlett Packard has agreed to buy hybrid and private cloud vendor Eucalyptus in a deal that could have major ripples throughout the industry.

By acquiring Eucalyptus, HP gains a tool sanctioned by Amazon to enable AWS-enabled workloads in its private cloud service. Eucalyptus signed a compatibility pact with Amazon in March 2012 that enables it to use Amazon APIs including Amazon Machine Images (AMIs) for its open source private cloud operating system software.

The deal, announced late yesterday, also means Eucalyptus CEO Marten Mickos will become general manager of HP's Cloud services and report to HP Chairman and CEO Meg Whitman. Mickos, the onetime CEO of MySQL, is a respected figure in infrastructure-as-a-service (IaaS) cloud circles, but the move certainly raised eyebrows.

Investor and consultant Ben Kepes, in a Forbes blog post, questioned whether Eucalyptus ran out of money and was forced into a fire sale, or if the acquisition was a desperate move by HP to give a push to its cloud business. HP has had numerous management and strategy shifts with its cloud business.

"One needs only to look at the employee changes in the HP cloud division." Kepes wrote. "Its main executive, Biri Singh, left last year. Martin Fink has been running the business since then and now Mickos will take over -- he'll apparently be reporting directly to CEO Meg Whitman but whether anything can be achieved given Whitman's broad range of issues to focus on is anyone's guess."

"The deal represents HP's recognition of the reality that much of what enterprise developers, teams and lines of business do revolves around Amazon Web Services," said Al Sadowski, a research director at 451 Research.

"HP clearly is trying to differentiate itself from Cisco, Dell and IBM by having its own AWS-compatible approach," said Kusnetzky Group analyst and Virtualization Review columnist Dan Kusnetzky. "I'm wondering what these players are going to do once Eucalyptus is an HP product. Some are likely to steer clients to OpenStack or Azure as a way to reduce HP's influence in their customer bases."

It also raises questions about the future of Helion, which despite HP's partnerships, emphasizes OpenStack -- something Mickos has been a longtime and vocal supporter of. "We are seeing the OpenStack Project become one of the largest and fastest growing open source projects in the world today," Mickos was quoted as saying on an HP blog post.

HP appears to have made this move to counter IBM's success with its cloud service, even though it appears the three front runners are Amazon, Microsoft and Google. In order to remain a player, HP needs to have compatibility with all three, as well as OpenStack, and acquiring Eucalyptus gives it a boost in offering Amazon compatibility.

451 Research's Sadowski indicated that HP's move likely targets IBM more than Microsoft. "HP is hoping to capture more of the enterprise market as organizations make their way beyond Amazon (and Azure) and build out their private and hybrid cloud deployments," he said. "We would guess that in acquiring Eucalyptus, the company is seeking to replicate the story that IBM has built with its SoftLayer buy and simultaneous OpenStack support."