Open Source Year in Review

Open Source continues to be an important part of  the mix in Virtualization and Cloud. Indeed, this year has seen major developments in established players at the Operating System and Hypervisor level, as well as a major new cloud entry at the IaaS cloud layer.

First, we should mention the acquisition of Novell by Attachmate for around $2.2bn, which was announced on November 22nd and which is expected to close next year.     It’s a complicated deal that involves a merger of Novell with a subsidiary of Attachmate known as Longview Software Acquisition Corp, with Novell becoming the surviving entity.  Attachmate plans to operate SUSE as a stand-alone business unit inside the Novell subsidiary after the transaction closes and anticipates no change to the relationship between the SUSE business and the openSUSE project as a result of this transaction. Novell has $1.1M of cash and coincidentally with the merger is selling patent assets to a consortium including Microsoft for $450M.  Novell is also able to recognize around $280M of deferred tax assets (which have accumulated through losses in the business or in acquired companies). This means that the overall cost to Attachmate for acquiring both the Novell legacy asset and SUSE is really quite small, and there are a few Novell shareholders complaining that Attachmate has got too good a deal. Once the transaction completes the standalone SUSE business could end up being be sold on (as we predicted in an earlier post).  Attachmate is owned by a group of Private equity investors and  acquired NetIQ in 2007. On balance, although we don’t quite know what Microsoft has bought in the side-transaction and why, we see the transaction as very positive for SUSE, and Attachmate as a much more dynamic owner of the SUSE technology – even if that ownership ends up only being temporary.

Red Hat, by contrast to SUSE, continues as an independent company.  It is doing around $1Bn in revenues and growing at around 20% pa and making small acquisitions of open source technology that is complementary to its core business. It released RHEL 6 this year and dumped Xen, committing to KVM for the future. It also split out the packaging of its virtualization layer to compete as a standalone product, RHEV (strictly-speaking that happened at the end of 2009). Although described as  bare-metal, KVM is still a Type 2 hypervisor, and RHEV is more about securing the underpinnings of the Red Hat installed base, rather than a serious attempt to take on VMware. At the IaaS level, Red Hat has its own initiative at Apache known as DeltaCloud, which provides API neutrality across various third-party IaaS clouds. It’s an alternative to OpenStack (see below) but one in which Red Hat is still notably isolated.

Red Hat and VMware can now be seen on convergent paths with Hypervisors, Management tools, IAAS Cloud, Middleware/PaaS.  All that remains is for VMWare to acquire an Operating System.  It had been leaning towards JeOS Linux, and a relationship with Canonical/Ubuntu.  In 2010 it reversed out of that position and moved towards SUSE, giving it away free with vSphere 4. We still predict that VMware may be SUSE’s ultimate destinationWith vFabric, VMware has of course another massive Open Source play.  Almost all of its vFabric (i.e. SpringSource) products are “Open Core” variants upon Open Source products with added features or support. In many cases the added layer of software is fairly thin, or even non-existent, but together the packaging is effective, and is allowing VMware to enter the middleware marketplace against Oracle, IBM and Red Hat/JBoss.

In the other open Source virtualization plays little has changed.  VirtualBox went to Oracle with the Sun acquisition and is still operating in more or less the same way. OpenVZ is still active. Xen continues, although its influence waned with the inclusion this year of KVM in SUSE, and there were extensive discussions around the Open Sourcing of XenServer, although we haven’t yet seen the source code.

However, the story has moved up the stack a little, and the biggest Open Source Cloud/Virtualization story of the year is in our view the OpenStack initiative from Rackspace, NASA and others. It’s an Open Source IaaS platform implementation (as opposed to DeltaCloud which is an Open Source API to various IaaS cloud) and it’s been launched by the number 2 IaaS service provided player to turn itself into number 1 – that position currently being held by Amazon. Since they are service providers not software vendors, neither player (despite using masses of Open Source software) were under any obligation to Open Source their proprietary codebases as “derivative works” under GPL.  RackSpace, however, has chosen to move its cloud codebase to an Apache license  and to build a community of developers and other vendors. NASA was happy to come across to the new initiative because it had fallen out with Eucalyptus.  Cloud.com (another open Source IaaS platform) got involved, teaming up with Microsoft to port OpenStack to Hyper-V. Citrix did its own port to XenServer.  There is momentum here and we await developments with interest.

Eucalyptus, a GPL dual-licenced vendor of an Amazon-alike IaaS platform, should however not be underestimated.  It provides the “private cloud” story for Amazon Web Services which is we believe by far the dominant player (actual IaaS cloud revenues are not generally broken out), and Euclayptus has been developing the NRE alliance to provide a bet-of-breed solution including provisioning and service catalog to appeal to enterprise buyers in IT as a Service scenarios. Eucalyptus has also managed to develop  relationship with Canonical/Ubuntu, packaging Ubuntu/Eucalptus as the Ubuntu Enterprise Cloud in the crucial Long Term Support 10.04 Release that will be the basis of most Ubuntu production server deployments for the next few years. OpenStack is trying to retrofit itself in the mix.

At the PaaS level, we see proprietary platforms starting to develop more of an Open Source flavour.  We noted Microsoft telling people they should put PHP on Azure (although we couldn’t work out why), and over the last week or so we saw SalesForce.com acquiring Heroku – a Ruby PaaS platform, alongside its proprietary java-based PaaS, Force.com.

There still isn’t much movement in the Desktop Virtualization space, reflecting the general lack of traction of Open Source on the desktop. In June Red Hat did launch its Red Hat Virtualization for Desktops product, allowing virtualized desktops running Linux or Windows as  guests on Red Hat servers to speak over Spice via a connection broker to server-hosted desktops.  There is no published application or terminal server support, for that you could consider Ulteo.  Both RHEL and Ulteo are likely lower-cost options than Citrix, and have the option of including Linux desktop applications in the mix, and although limited to specialist applications, we expect functionality to be added to both Ulteo and RHEV which will allow them to compete in more deployment scenarios.