HP announced on September 11, 2014 that they had entered into an agreement to acquire Eucalyptus. Eucalyptus is a vendor of private IaaS services. Eucalyptus is a startup with fewer than 100 employees and around $55 million in venture funding. Eucalyptus doesn’t have an application development and deployment (AD&D) play but could certainly provide the foundation for a private PaaS. HP, despite their unusual acquisition of Mercury Interactive back in 2006, is otherwise not in the AD&D business. However, Eucalyptus does put HP a partnership or acquisition away from PaaS, so let’s look at the potential motivation of the deal.
The Eucalyptus acquisition is about helping HP customers gain better leverage from their investments. Eucalyptus is a way to show material value to HP’s installed back of server, storage, and networking customers and show that HP can be forward-looking. This is also a low risk acquisition for HP for two reasons. First the acquisition didn’t cost HP that much (less than $100 million, it is rumored) and second, the Eucalyptus technology will help build out HP’s Helion brand, which will enhance its private IaaS appeal.
Eucalyptus alignment with Amazon’s APIs gives it an interesting hybrid dimensionality. This will doubtlessly be appealing to customers because it represents additional leverage for their investment. There is not much risk to HP of Amazon getting into the private IaaS business. There’s little to gain for Amazon in going down the private cloud path and much for Amazon to gain as Eucalyptus customers see what is now easily within reach in Amazon’s public cloud. The bigger concern to HP comes if Eucalyptus and Helion gain significant traction. Eucalyptus’ design point brings Amazon into the picture and this will accelerate the movement of workloads to the public cloud which means a reduction in the demand for hardware and networking – including HP servers, storage, and networking.
The net is that Eucalyptus will help HP stabilize its cloud strategy, which has been drifting. HP is probably hoping for the same sort of jump-start that IBM got by using cloud foundry to put its PaaS strategy in order. While we see the acquisition of Eucalyptus as beneficial, HP will need to take additional steps to continue their cloud momentum. This means that HP should continue to build out their portfolio of Eucalyptus services and look for PaaS and SaaS solutions through partnering to create stickiness for the Eucalyptus IaaS.