What is Happening? Announcements within the past two weeks by IBM and Oracle have been touted as helping to promote the use of private Clouds. Saugatuck believes that they may actually help to limit the attractiveness of private Clouds, while driving more and better management of the fast-growing hybridized Cloud-plus-on-premises IT environment.

IBM recently announced that it will be joining the OpenStack Foundation as a platinum-level sponsor, joining a panoply of traditional and pure-play Cloud IT brands that includes AT&T, Canonical, HP, Nebula, Rackspace, Red Hat and SUSE. As part of the announcement, IBM also announced that all of its Cloud services and software will be based on the Open Cloud Reference Architecture.

Then this week, Oracle Corp. announced its acquisition of Cloud management software developer Nimbula. Founded in 2009 by Amazon Cloud creators Chris Pinkham and Willem van Biljon, Nimbula is built “from the Cloud down,” with its core offerings engineered from the beginning to optimize what Cloud IT and providers can deliver to each other and to users (read "Nimbula and Red Hat Spotlight Cloud Approaches and Debates"). The company’s flagship product is Nimbula Director, software designed to manage both on-premise and Cloud IT resources using a customer-controlled infrastructure. It also can identify and enable public Cloud functionality in a private Cloud environment.

Why is it Happening? These announcements fit well with both Master Brands’ known Cloud intentions. Both IBM and Oracle feel pressure and a need to develop and improve Cloud offerings, including Private Clouds for their large enterprise customers. IBM is widely expected to develop and roll out a private cloud service based on OpenStack very soon. Oracle has likewise been pushing to roll out advanced Cloud capabilities for its mostly-traditional, large-enterprise clientele.

And both moves also enable IBM and Oracle to develop and deliver advanced services to manage hybrid Cloud environments, which Saugatuck continues to believe will be one of the most necessary and lucrative opportunities for Cloud services providers. We especially expect Nimbula’s leaders, engineers, and offerings to be the foundation for Oracle’s own Cloud presence, and a cornerstone for its long-term Cloud services foundation. Nimbula also brings to Oracle its OpenStack API, which enables Oracle, its developers and VARs, and its customers to reduce their dependencies on proprietary Cloud architectures and technologies. IBM’s customer and partner ecosystem will likewise benefit from its OpenCloud sponsorship.

Demand for Private Clouds exists because enterprise leaders feel a need to ensure data security, system reliability, and workload management. However, Saugatuck’s research continues to show the ability of Public Cloud providers to deliver safety and reliability as equal to that of most Private Clouds, with buyer confidence in Public Clouds increasing.

Other factors come into play to cast doubt on the viability of Private Clouds. Perhaps the most significant is the cost issue. Private Clouds are not yet mature technology. Their implementation and management is art, not science. By contrast, Public Clouds have matured significantly over the past ten years. Cost-benefit and ROI calculations comparing Private and Public Clouds significantly favor Public Clouds. They are cheaper to use and providers of Public Clouds are highly professional and service-oriented.

The outlook for Private Clouds will most likely narrow over time, as enterprises move more and more workloads to a variety of cost-effective, yet disparate services from SaaS/IaaS/PaaS/ BPaaS providers. In fact, OpenStack encourages this by enabling more reliable and inexpensive development, linkage, and sharing of Public Cloud architecture and services.

As a result, Saugatuck believes there is another very important overlooked aspect to these moves, much greater than the Private Cloud opportunity: Improved hybrid Cloud environment management. Standardization is necessary and useful to reduce costs while enabling greater functionality and control. In a Cloud environment, standardization also enables more loose coupling of resources and users, which enables more widespread use of Cloud and less reliance on single (including Private) Cloud provision. This greatly enhances the value of management systems and services that have been or will be developed or optimized for hybridized environments.

For an extended version of this Research Alert, visit Saugatuck Technology.