Another day, another $100 million gamble on the private cloud.
This one comes from Intel, which is the lead on a $100 million investment in Mirantis, the third-largest OpenStack contributor (behind only Red Hat and HP). As noted by the Wall Street Journal‘s Don Clark, “Intel’s new commitment, while not decisive, could help make the product more appealing to corporate users.”
Definitely maybe. But that’s not really the point of the funding.
This funding doesn’t say much about OpenStack’s future, which remains cloudy so long as the project remains so cumbersome to use. Rather, the $100 million funding says everything about Intel’s future.
I only want a world that I dominate
Let’s face it: Intel is in trouble. All the big trends in technology–from mobile to cloud–have tended to diminish Intel’s once formidable hold on the market. Despite dominating desktops with its Wintel duopoly and owning a massive chunk of the server market, Intel has been an also-ran in mobile and cloud.
Today, IDC projects data center demand to explode by 750% by 2019, largely driven by the Internet of Things (IoT). Not only is Intel not missing out on the “things” chip market, but it’s getting squeezed on the “Internet” side, too.
As documented in a previous post, “While success has tended to be measured by how many data centers a company builds to handle its scale, IoT may be moving too fast for all but a limited number of companies to handle. Think Facebook, Twitter, Google, and Amazon Web Services (AWS). [Most enterprises] probably don’t make the cut.”
Intel might still be OK if it simply dominated sales to the mega-cloud vendors and, as Brandon Butler details, the company is currently selling big into AWS, Microsoft, and Google, as well as data centers, generally.
But that gravy train always is at risk of petering out, especially in a world where Apple and others increasingly design and build their own chips, and others like Facebook open source their entire data center.
As such, Gartner analyst Lydia Leong is spot on to call out Intel’s worry:
Open source (and Intel cash) to the rescue?
Of course, just because Intel is motivated by its wallet doesn’t mean it’s wrong to worry about market hegemony by a few big cloud vendors.
Mirantis takes this line of reasoning in the announcement of its funding.
The problem, Mirantis executive Alex Freedland posits, is that:
“Everyone who has ever touched AWS knows how easy and user friendly it is, and Amazon and its competitors continue to destroy costs by innovating at every layer of the stack, taking advantage of the economies of scale and homogeneity of their infrastructure. It feels like a breath of fresh air when compared to the behavior of legacy vendors such as IBM and HP…. These vendors have a disincentive to reduce costs, and they need every penny of their astronomically high margins to justify their lofty market capitalization.”
You know. The old oligopolies.
Freedland’s point, in addition to pimping OpenStack as a way for the “whole world to integrate their innovations without worrying that a guard at the door will turn them away,” is that we don’t want to trade old oligopolies for new ones.
He’s got a point.
But that’s not Intel’s concern. Intel very much wants to reclaim its place as the industry’s dominant chipmaker. I don’t think anyone at Intel is staying awake at night, fretting about consumer or enterprise freedom.
Rather, they’re up all night thinking about how to ensure they don’t get locked out of the cloud. The company’s mobile chip unit bled $4.2 billion in 2014. Intel can’t afford to have this continue… not in the cloud.
Whether a big investment in OpenStack will be enough to hedge its risk that public cloud providers will look elsewhere for chips remains to be seen. Full credit to Intel, however, for taking the initiative.