The data center circa 2013 is a virtualizing vortex, but The Sea, one of Palo Alto’s premier eateries, felt like the eye of the hurricane on September 19, when Menlo Ventures brought together two dozen executives for a summit on the future of IT. Attendees represented global enterprises (Citigroup, Thompson Reuters), infrastructure leaders (HP, Juniper Networks, NetApp, Red Hat, VMware), and a plethora of startups vying to midwife the emerging software-defined network.
We hold these events periodically to gain insight into market developments and spur relationships that might blossom into new, high-growth companies. The previous one, in August, covered cybersecurity. This time, our concerns were the impact of open source software, the role of public and private clouds, and the evolution of underlying hardware.
The opinions aired were as diverse as the companies represented. Amid the debate, though, broad themes emerged in three areas: the progress of OpenStack, the evolution of cloud architectures, and potential of converged infrastructure.
• OpenStack has a long way to go. With three years behind it and 57 members to its credit, the OpenStack initiative is a potential juggernaut. After all, an open source alternative to VMware’s private cloud and Amazon Web Services’ public cloud would liberate businesses from reliance on proprietary technology and the higher prices, slower development cycles, and vendor lock-in that go with it. Yet the near-term outlook isn’t so bright. For one thing, OpenStack implementations are so variable that they don’t even interoperate with one another, much less with competitors. Moreover, the market is too small and fragmented to support value-add businesses that would put the technology on a solid footing, as Red Hat did for Linux. “A lot depends on enterprise credibility,” said Shekar Ayyar, VMware’s SVP of strategy and corporate development. “Unless someone can build mission-critical applications on it, it isn’t credible.”
• Public cloud services are pushing private clouds to the sidelines. As Amazon, Google, Dropbox, and the like radically shrink costs, all but the most security-sensitive businesses will find compelling advantages in migrating to public clouds. Those most likely to rely on private clouds — banks, insurers, healthcare providers — will do so cultural, not economic or technical reasons. “If you had asked in 2010, I would have said that everyone needs better control of security, and Amazon had too much exposure,” observed Said Ziouani, CEO of AnsibleWorks, a Menlo Ventures portfolio company that builds software for orchestrating cloud deployments. “Now I think differently. The public cloud is viable. I’m not convinced about private cloud.”
• Converged architectures face an open horizon. There are good reasons to focus on limits to growth in converged infrastructure that integrates server, storage, networking, and virtualization into a single solution: enterprise fiefdoms controlling different parts of the stack, the imperative to optimize for nonstandard applications. However, converged designs from companies including Convergent.io, Nutanix, Pluribus, and Simplivity align well with the move toward software-defined networks, the imperative to scale rapidly, and the increasing importance of analytics — trends that affect businesses across the spectrum of size and industry. But the big driver will be cost savings on management. “The op-ex improvement you get by making it easier for administrators is a much bigger factor, at this point, than the cap-ex reductions,” said Robert Drost, CEO of Pluribus Networks, a Menlo Ventures-funded maker of high-performance switches.
As the discussion wound down, several guests stood to summarize what they had heard and what they thought about it. The fundamental takeaway: Network innovation is bringing huge opportunities. As the data center shifts from the hardwired past to a fluid future, the market as a whole is poised for massive growth.