This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Can This OpenStack Be Saved?

NEW YORK ( TheStreet) -- The cloud market has not evolved the way it was supposed to.

While public clouds like Amazon.com's (AMZN - Get Report) AWS were expected to grab a lot of business from start-ups and corporate marketing departments, it was assumed that mainstream information-technology people would be afraid to embrace it.

The idea was that these folks would build their own private clouds, and then look to connect these clouds to compatible public clouds, creating hybrid clouds.

OpenStack, an open-source cloud infrastructure, was developed around this idea. Rackspace (RAX - Get Report), the original sponsor, is a Web host that now uses the technology in its public cloud. The bullish case for its stock is that it would gain traction in the public cloud market as companies built private clouds and attached them, creating compatible hybrids.

Many big companies were attracted to the OpenStack idea, sponsoring the software, nurturing it, and eventually organizing an OpenStack Foundation around it. Red Hat (RHT), a Linux vendor with lots of big customers, committed to OpenStack. So did Hewlett-Packard (HPQ) . More important, so did IBM (IBM).

So what happened? Amazon kept cutting prices, and kept gaining customers. Big corporations found they needed "big data," and insights from analyzing it, more than they realized.


Google (GOOG) saw this train leaving the station and matched Amazon's prices. Microsoft (MSFT), whose Azure cloud platform was first sold as a more sophisticated, Windows-centric public cloud, chose to offer base infrastructure and matched Amazon's prices as well.

The public cloud price war has hammered Rackspace's results, and stock price. It seems to have discouraged other OpenStack supporters, like Dell (DELL), which said this week it would resell partners' cloud services rather than create its own OpenStack cloud.

You might say a cloud hangs over the OpenStack cloud. Without a price-competitive entrant in the hot part of the market - public cloud - it's hard to see how it will ever gain traction as a replacement for existing computing infrastructures.

I suggested this represented a problem to IBM on another channel.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AMZN $438.56 -1.47%
RAX $55.39 1.37%
AAPL $132.65 1.82%
FB $81.91 0.47%
GOOG $555.37 -1.71%

Markets

DOW 18,037.97 -42.17 -0.23%
S&P 500 2,108.92 -8.77 -0.41%
NASDAQ 5,060.2460 -31.8390 -0.63%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs