Citrix has really stepped on themselves with Openstack and Cloud.com.

According to my sources and many blog posts around the web, Citrix really seems to have shot themselves in the foot.  Or did Apache just score a coup.

I am hearing from insiders that Citrix is a mess (in PR but strong in the product groups). This Citrix mess might just be bad PR in action, but something doesn’t smell right in Citrix land. Network Computing editor Mike Fratto has a good story on Citrix (read the comments – very telling).

The big winner in all this mess is Apache who is running the table on the open source world with great projects all around like Hadoop and Hbase. This Citrix open source horror story really says something about the state of open source. That is open source isn’t a marketing vehicle in this next generation developers.

According to a blog post today insiders lay down some serious slams against Citrix.

Citrix is one of the founding members of OpenStack, with representation on the project policy board; the company has been quite active evangelizing the community through various events and code contributions. So why, all of a sudden, a move that may appear to undermine the OpenStack momentum?

Let’s take a look at the history. When Citrix bought Cloud.com for more than $200 million in July, 2011, insider information suggested the company had revenue of only a several million. While high valuations were not uncommon in the cloud space, a 40x revenue multiple is quite unusual. Why did Citrix do it? The only answer that comes to mind was that it wanted to quickly gain credibility in the cloud market.

I believe that corporate politics and relationships also played a role in this deal. Cloud.com was backed by Redpoint Ventures, which had an existing track record of selling its portfolio companies to Citrix. But, more importantly, Cloud.com founder and CEO – Sheng Liang – was also the founder and CTO of Teros Networks, a Web security company that was acquired by the very same Citrix just a few years before Cloud.com was founded. In fact, I am pretty sure, that in some sense cloud.com was Citrix’s skunk works project; acquisition by Citrix was the key part of the Cloud.com business plan. While there is nothing wrong with the approach and I can only complement the strategy, the early connection between Citrix and Cloud.com was key to its successful exit and the events that followed.

Just one year before the acquisition of Cloud.com, OpenStack was announced at OSCON and nobody knew what to think of it. It took the open source community by a storm and it soon became evident to all those competing for open cloud dominance, that simply ignoring the OpenStack phenomenon was not an option. “Open cloud strategy” soon became synonymous with the “OpenStack Strategy”. Citrix, a founding member of OpenStack itself, was in a bit of a tight spot. One choice was to abandon its Cloud.com project. Given the OpenStack momentum at the time, this could inevitably translate to the swift death of Cloud.com and $17 million in losses to the VCs backing it. Alternatively, Citrix could go all in, acquire the Cloud.com community to boast its credibility in the open source cloud space and take a stab at creating the dominant distribution of OpenStack, ultimately becoming to OpenStack what Red Hat has become to Linux. In the end, the scales tipped towards the latter option. In May, 2011 Citrix announced its distribution of OpenStack – project Olympus. Two months thereafter, the Cloud.com acquisition was announced.

However, when the dust settled, it became evident that Citrix’s involvement with Cloud.com and OpenStack (Project Olympus), instead of being complimentary as Citrix has anticipated, has been perceived as strange and surprising. CloudStack is Java based, whereas OpenStack is all Python. On the compute side, CloudStack focused on Xen, whereas the dominant hypervisor for OpenStack so far has been KVM. CloudStack was licensed under GPL, and OpenStack under Apache 2.0. Ultimately, Citrix’s cloud.com acquisition was sending confusing messages to both communities and Citrix’s customer base. A few months after Citrix’s acquisition, the Cloud.com community had little momentum left. At the same time, the OpenStack community remained wary of Citrix due to its involvement with CloudStack. Consequently, not much has happened with Project Olympus since its announcement over a year ago until it was officially abandoned with the latest announcement.

Today, Citrix announced that Cloud.com will find a new home with the Apache foundation. Is it a hostile move that will undermine OpenStack? I see it more as an act of desperation. Clearly, that wasn’t the initial plan, when Citrix first acquired Cloud.com. Consequently Citrix has failed to build the community around Cloud.com, miscalculated the synergies between the two communities, got trumped by OpenStack momentum, and dumped what’s left of Cloud.com to the Apache foundation. They have already announced CloudStack would be open source twice before, yet have received no outside contributions to date. The last commit to Cloud.com on GitHub by a non-Citrix employee is dated several months ago.

At this point, Citrix has a spotty history when it comes to open source. Open source is built on trust and they are hard to trust right now. Having burned bridges at their last two communities (Xen / Linux) and now OpenStack, it is going to be big challenge for them to revive CloudStack from its present semi-dead state.

According to Jim Plamondon, Director, Developer Relations at Rackspace Cloud says

“Eucalyptus and CloudStack are “zombie projects,” being used tactically by Amazon to achieve its strategic objectives — as Microsoft used similar zombie projects in the 1990′s. Any firm that uses these zombies runs the risk of infection with the zombie virus, thereby risking disaster when Amazon slaughters its zombies in a future Cloud Zombie Apocalypse.”

Cloud Moves
I wrote in August that moves by the bigger and up and coming players like VMWare will threaten OpenStack which has become a marketing machine while lacking in technical credibility.

In the new era of where overnight the wrong strategy decision can sink a company (even established legendary ones), cloud platform and developer decisions are most important. VMware and others are moving fast in announcing and delivering real cloud platforms, products, and services.

Since its’ founding OpenStack has gotten lots of attention from industry companies looking to establish a cloud strategy. Nearly every large hardware company (and OEMs) looking to establish a cloud strategy are considering trying to throw its weight behind the “OpenStack movement”. The important driver in a cloud partnerships is added value not just marketing.

Can Openstack continue their momentum? Up to this point their PR, marketing, and open source messaging has been well received, but can Openstack deliver products fast enough?

Who is the most successful storage company today? EMC. Who is the most successful cloud services company? Amazon. Last year at VMworld we saw VMware rollout some new commercial capabilities with a vibrant ecosystem to support it.  OpenStack must keep up with this kind of “walking the talk”.

On the surface OpenStack looks great – partners lined up, tech announcements coming together, even HP is betting the ranch on OpenStack. Companies hope that OpenStack can be their bridge to the future.

Typical Conversation Around OpenStack

Here’s a likely conversation taking place at the big hardware vendors these days:

CEO: The cloud is important. Everyone says it’s the future. We should be doing something about it.

CFO: What can we do? We don’t know much about this.

CMO: We already added the word “cloud” to all of our server and storage boxes. We’re kind of selling cloud right now, aren’t we?

VP: Well, I heard of this thing called OpenStack. It doesn’t actually cost us anything and we don’t really need to do anything except publicly say that we support it. This way the media will write about us and we can say we have a cloud play until we figure things out internally.

CEO: Genius! Let’s make it happen. Now what exactly is this cloud thing again?

Since Rackspace was new the cloud and had no real developer program, OpenStack was conceived to get developers on board in order to compete against Amazon. OpenStack approach is sound, but can it gain momentum when VMware and others are moving fast in getting clients real clouds.

OpenStack’s key challenge is that the big enterprises tend to buy established and commercial grade products and service. Specifically, they want production-grade framework, objects synchronized and data consistency.

I talked with an executive at a big cloud company who didn’t want to come forward and he said the following “what these big OEMs like HP and Oracle looking for cloud plans should be spending their time on instead of Opensource is to figuring out how exactly they plan to compete with the likes of Amazon, Google and Microsoft Azure.”

Dollars that used to be going to the big hardware vendors are now going straight to the cloud. As Google and Amazon intensify their focus on the cloud space the answer from the hardware vendors can’t continue to be “we’re going to be the infrastructure outfitters—the arms dealers—to the cloud service providers.”

Market leaders Amazon and Google and upstarts like Nirvanix aren’t using multi-million dollar boxes from companies like Oracle to run their clouds. They’re all running on commodity, high-density servers and storage systems to get the costs down as low as possible. Some of them are building their own gear! They’re not accustomed to the fat cat margins that the hardware vendors have thrived on for decades. Instead they learned to build lean, lithe, agile businesses on cloud services models using inexpensive hardware and their own value-add software. That’s where the innovation is going—the software layer with very efficient converged infrastructure oriented hardware (networks, SSD storage, servers).

Amazon, Google, Nirvanix, and even startups are intensifying their market traction and winning accounts that the big guys used to win. Those thousands of companies using Gmail and Google Apps used to buy storage and servers from one of the big boys to run Microsoft Exchange. For example companies are running stuff on Amazon, considering Google, and even putting petabytes of digital content in the Nirvanix cloud. In the past those customers used to buy physical machines and pay exorbitant maintenance fees on them.

The big established hardware and software players need real products in the market that are cloud based. For example storage as a service with a pay by usage pricing before the Amazons and Googles of the world get into the billion dollar revenue range. I’ve been specifically optimistic about HP’s potential there. HP’s has a big cloud opportunity maybe more than the others they compete with.

The net effect is companies need to have real cloud products and services ones that tie to the future user expectations – a personal computer that is a phone or other thin device all tied together with software.

The mantra for the big companies is “cloud or die”.