Whether to build or buy is the classic dilemma faced by service providers and enterprises looking to deliver a new set of IT resources.  In reality, the question is often about how much to build and how much to buy to achieve the desired combination of functionality and integration.  Many buyers end up pulling together a mix of commercial and open source software and premier branded or low-cost no-name hardware products. 

SoftBank Telecom has chosen what can be considered an easier and faster way to bring to market its business cloud services by buying a turnkey, cloud-in-a-box solution consisting of 8x8's Zerigo cloud platform software running on VCE's Vblock converged cloud infrastructure systems.  These appliance-like systems feature optimized, scalable, and integrated compute, storage and networking technologies from Cisco and EMC (which formed VCE) as well as VMware.  When SoftBank was evaluating platforms to serve as the foundation for the cloud services that it will initially roll out in Japan and later around the globe, the fact that 8x8's software was certified to run on Vblock was compelling.  Why not benefit from the combined expertise and learnings that 8x8 and VCE have already in building cloud solutions?

Service provider 8x8 acquired Zerigo in June 2011 for its software that enables 8x8 to sell services to end users through portals and to provide the orchestration management for easy creation and provisioning of virtual servers.  8x8 purchased a VCE Vblock system to run its cloud services.  Its experience running its software on Vblock systems first led 8x8 to a software licensing deal in January 2013 with data center, cloud and managed service provider CoSentry based in the US midwest.  It has now led to this deal with SoftBank that will include adding virtual desktop infrastructure (VDI) capability to the Zerigo software so that SoftBank can offer VDI cloud services to its customers.  Both CoSentry and SoftBank were interested in using Vblock systems to provide the scalable and optimized foundation for hosting cloud servicers for their customers.

Other companies looking to launch or expand business cloud services would benefit from following this example and relying on commercial or open source cloud software running on converged systems from companies like VCE, IBM, HP and Dell.  Only large cloud service providers like Amazon as well as a few smaller providers that have already invested significant time and effort into building and integrating their own cloud infrastructure systems may be the only ones doing so in several years.

On April 10, 2012, HP announced a comprehensive business cloud strategy called the HP Converged Cloud. Building on its existing portfolio of traditional, managed, and private cloud products and services for corporate IT organizations, HP is adding its first public cloud Infrastructure as a Service (IaaS) and Platform as a Service (PaaS) offerings. This business cloud computing strategy is well suited for HP because it elevates rather than disrupts existing corporate IT models for customers and HP. It responds to rising customer interest in cloud computing while remaining focused on HP’s core strengths of IT managed services and premium hardware systems based on open industry standards.

HP’s most recent financials reveal just how fundamental IT services and enterprise servers, storage and networking hardware are to its business (HP Q1 2012 Net Revenues, $30.7B total):

Source:  HP, 2012

With a quarterly run rate of $9B in net revenue and $0.9B in earnings from outsourcing, technology and consulting services fees, HP has the expertise, staffing, business processes and credibility to build and operate world class cloud data centers for its customers.  With a quarterly run rate of $5B in net revenue and $0.6B in earnings from enterprise storage, server and networking systems sales, HP is heavily dependent on business and technology cycles that drive customers to replace systems on a regular basis.  HP benefits from cloud adoption both when its customers buy systems for private or hybrid cloud environments and when they buy public cloud services delivered from HP or HP service provider customer data centers filled with HP systems.

HP’s Converged Cloud strategy aligns well with what organizations are looking to get from cloud computing and cloud providers.  According to our Q1 2012 Enterprise IT seven-country survey, the most important factor when selecting cloud services and providers is the ease of managing the solution.  Since the easiest type of management is relying on a trusted 3rd party to be responsible for management, HP will benefit from having a top management services practice that can itself exploit the HP Converged Cloud Architecture to manage public, private and hybrid cloud data centers for customers.

In announcing the HP Cloud Services Ecosystem partner program as part of the HP Converged Cloud, HP is asserting its position as a leader in the multi-player cloud ecosystem.  This signals to HP’s current and future partners that HP is committed to a collaborative approach for pursuing cloud opportunities and responding to customer needs. HP describes this program as a step on the path toward an HP Cloud Services Marketplace that will offer customers the experience of purchasing HP and partner cloud services using one account and billing statement. HP’s new partner ecosystem is already enabling HP to elevate its portfolio far beyond its traditional managed Microsoft and SAP services.  Launching this marketplace in the next year could prove to be the most important element of HP’s cloud vision in the long term. 

For more analysis, see our Extended Enterprise Software Strategies Insight, HP Converged Cloud Manages Customer Needs and Its Own Strengths in the Cloud.

Post or send your comments to mlevitt@strategyanalytics.com