Quite a surprise this morning when news was out that HP acquired Eucalyptus. A surprise because HP had previously firmly committed to OpenStack and its related benefits, and become the largest OpenStack contributor. And Eucalyptus and OpenStack have not been best friends in the past, with Eucalyptus CEO Marten Mickos even referring to OpenStack as the Soviet Union of Cloud, making fun of the numerous contributors to the open source project. 



So let’s dissect in typical Constellation style the press release that can be found here:

PALO ALTO, Calif., Sept. 11, 2014 — HP today announced a definitive agreement to acquire Eucalyptus, a provider of open source software for building private and hybrid enterprise clouds.

MyPOV – Ok – surprise. And sad to a certain point as the first private cloud platform provider is gone, originally being built at the University of California Santa Barbara (UCSB). And the simplest to install platform, too.

After the transaction closes, Eucalyptus Chief Executive Officer (CEO) Marten Mickos, a respected leader in the cloud industry and a longtime advocate of open source, will join HP as senior vice president and general manager of the Cloud business, reporting to Meg Whitman, chairman, president and chief executive officer of HP.

MyPOV – It’s the second time Mickos sells software to hardware vendors, the first time was MySQL to Sun, now Eucalyptus to HP. Only now the non-disclosed acquisition price will be far away from the (then very generous) 1B US$ for MySQL. The amount is immaterial for HP, not affecting its earning and HP will make employment offers to all Eucalyptus employees. So more an acqui-hire than an acquisition?

In this role, Mickos will lead the HP Cloud organization in building out the HP Helion portfolio, based on OpenStack® technology. Prior to Eucalyptus, Mickos was CEO of MySQL, which he grew from a garage start-up to the company providing the second most widely used open source software in the world.

“The addition of Marten to HP’s world-class Cloud leadership team will strengthen and accelerate the strategy we’ve had in place for more than three years, which is to help businesses build, consume and manage open source hybrid clouds,” said Whitman. “Marten will enhance HP’s outstanding bench of Cloud executives and expand HP Helion capabilities, giving customers more choice and greater control of private and hybrid cloud solutions.”

MyPOV – So more choice for HP customers, and Mickos runs all of HP Cloud, including the OpenStack pieces. No word from Whitman in regards of Eucalyptus software assets.

“Eucalyptus and HP share a common vision for the future of cloud in the enterprise,” said Mickos. “Enterprises are demanding open source cloud solutions, and I’m thrilled to have this opportunity to grow the HP Helion portfolio and lead a world-class business that delivers private, hybrid, managed and public clouds to enterprise customers worldwide.”

MyPOV – Congrats to Marten, hopefully more fun to build cloud at HP than with a startup that had to fight the cloud giants.

Martin Fink, who currently leads HP’s Cloud business, will remain in his roles as chief technology officer of HP and director of HP Labs, where he will focus on innovation and creating groundbreaking solutions like The Machine. Fink will also continue to lead HP’s Network Functions Virtualization (NFV) business.

MyPOV – Looks like Cloud was only an interim job for Fink – in addition of all his other responsibilities.

“We’ve said before that we believe the future of the Cloud is open source, and this transaction underscores our deep commitment to helping customers build enterprise-class, open clouds their way,” said Fink. “We’ve already seen significant momentum since launching HP Helion and have put in place an outstanding team. I’m confident that Marten, a fellow open source devotee, will continue to build out the HP Helion portfolio into the enterprise cloud offering of choice.”

MyPOV – Certainly HP thinks open source is the future for cloud, and has added on more open source offering to its cloud portfolio with Eucalyptus. Ironically it raises questions on the future of the Eucalyptus (open source) product that will need to be addressed. For now in a Q&A HP said it will keep supporting Eucalyptus. It will be interesting how much of the Eucalyptus open source project was contributed by Eucalyptus (the company) employees.

Since introducing HP Helion in May, HP has grown share in private cloud and was ranked as the leader in the Forrester Wave report for Private Cloud Solutions.(1) In addition, HP recently announced an agreement to build and operate community clouds for enterprise customers in China, one of the fastest growing cloud markets in the world, and also announced HP Helion OpenStack Professional Services to help enterprises implement OpenStack technology–based clouds. HP is the leading code contributor to the next release of OpenStack code, scheduled for October. […]

MyPOV – Despite all the successes, the acquisition shows HP needed help on the management and / or product side.

Implications, Implications

So let’s look at the implications in the market…

Implications for HP Customers

I don’t expect this to be a distraction of HP Helion investment. Instead HP gets an experienced open source veteran and has more management bandwidth.
  • HP OpenStack customers – Interesting, but not relevant. Deep down the road maybe a chance to take AWS loads into Helion. But this is speculation.
  • HP customers with loads on AWS – This is good news – as they probably can take AWS loads back onto Helion. But these customers – assuming they are using Eucalyptus in their private cloud already – should make the TCO comparison of their data center vs. Helion first. 

Implications for Eucalyptus customers

As usual with acquisitions, Constellation recommends customers of the acquired vendors to immediately get reassurances from the acquirer (HP) that products and services will be continued. If these customers have a dependency of capabilities in the next Eucalyptus release, add them to the conversations with HP and secure them contractually.

Next look what AWS will be doing, which likely is not thrilled of customers being able to take AWS loads into HP run private (or cloud) data centers. It’s likely that the largest Eucalyptus customer, Nokia (Mickos is on the board) is moving to Microsoft Azure sooner than later. 

[Update from Mickos via HP AR - Of course Nokia made an independent decision, let's give both Mickos and Nokia the benefit of the doubt and believe it is so. Mickos also made the point that the large size of the Nokia cloud will more likely move to OpenStack than Azure. No surprise, future will tell.]

So customers should keep an eye on how much critical mass is left for Eucalyptus. And lastly Eucalyptus’ close relationship with Dell needs attention of mutual customers, as HP and Dell are – putting it mildly – not best friends.

Implications for HP

HP will have to clarify what it wants to do longer term with two open source cloud stacks. Maybe a SMB offering is in the making, given the relative ease (one command line!) install capabilities of Eucalyptus. Maybe HP also felt it need the expertise of Eucalyptus to make its OpenStack installation equally easy to use. And longer term HP get a great opportunity to chip away load from AWS – more in the final MyPOV below.

Implications for competitors

HP has gained a key tool to put more loads onto HP Helion. Going after AWS loads and using them in their respective cloud offerings is something other vendors (IBM, RedHat etc.) could have used, too. But maybe other vendors don’t need the load (e.g. IBM) or don’t want to put in the capex for an additional cloud rollout (e.g. RedHat). Equally AWS could have made a move in the hybrid market, allowing customers to move loads to local data centers, and then at least extract license revenues and more from this move, as right now customers are completely gone revenue wise in this scenario. Longer term it may force the lock-in argument more in AWS sales opportunities. Dell could have acquired Eucalyptus, too – but the assets may not have fit into the strategic plans in Austin.


A good move by HP, which short term has a messaging challenge. Medium term gets an experienced executive and developer team. Longer term it gives HP the chance to convert AWS loads in Helion loads (running as Eucalyptus and maybe, with some clever work – as OpenStack loads). And the cloud game is all about loads and getting economies of scale from them. HP as a late entrant needs them more than established players and now has an opportunity to chip them from the overall market leader in overall cloud load AWS.

And certainly Mickos keynote at OpenStack Summit on September 16th gets a totally background and will be interesting to follow.


More about HP
  • New Analyis - Today's Billion in Cloud Investment is HP's and goes to Helion - read here
  • A tale of two cloud GAs - Google & HP - read here
  • The cloud is growing up - 3 signs from the news - read here
  • To HAVEn and have not - or: HP Bundles away - read here
More about IBM


  • Event Report - What a difference a year makes - and IBM is off to a good start but the road is long - read here
  • First Take - 3 Key Takeaways from IBM's Impact Conference - Day 1 Keynote - read here
  • Another week and another Billion - this week it's a BlueMix Paas - read here
  • First take - IBM makes Connection - introduces the TalentSuite at IBM Connect - read here
  • IBM kicks of cloud data center race in 2014 - read here
  • First Take - IBM Software Group's Analyst Insights - read here
  • Are we witnessing one of the largest cloud moves - so far? Read here
  • Why IBM acquired Softlayer - read her
More about Microsoft:
  • Event Report - Azure grows and blossoms - enough for enterprises (yet)? Read here
  • Event Report - Microsoft Build Day 1 Keynote - Top Enterprise Takeaways - read here.
  • Microsoft gets even more serious about devices - acquire Nokia - read here.
  • Microsoft does not need one new CEO - but six - read here.
  • Microsoft makes the cloud a platform play - Or: Azure and her 7 friends - read here.
  • How the Cloud can make the unlikeliest bedfellows - read here.
  • How hard is multi-channel CRM in 2013? - Read here.
  • How hard is it to install Office 365? Or: The harsh reality of customer support - read here.