I am getting reports that cloud startup Cirtas is cutting almost 75% of their company in what appears to be a major pivot.  According to a tweet by Cirtas employee Dave Graham, he tweeted the following:

“well, the waiting is over. as of 3pm TODAY, i, along with 20 others are no longer employed by Cirtas Systems.”

Earlier this year Cirtas scored $22 million in fresh venture funding (which we covered).    SiliconANGLE.tv interviewed the VP of Marketing Josh Goldstein just last week on theCube at SNW.  Cirtas Systems is backed by some big time venture capitalists, including NEA.   Krishna “Kittu” Kolluri of NEA, Barry Eggers of Lightspeed, Ravi Mohan, of Shasta all sit on the board of Cirtas.

The company isn’t burying its head in the sand, This is a pure pivot.  According to their CEO Gary Messiana, the issues is a gateway product concern (product issues).  Gary went on to say on my voicemail “two things are happening for the company: 1) they are getting offers to buy the company and 2) the product needed to be retooled for extensibility.”   The company felt it was best to focus on the product to make it extensible rather than sell what is on the market today.

The company put out an official statement according to their spokesperson.  “Cirtas has decided to pull back from the market at this time. Through our deployments we’ve learned a significant amount about what is required by the market and believe it is in the best interest of the company, our partners, and customers to focus on what we’ve learned.”

Cloud can be messy in the quest to have the right formula for success.   In today’s NY Times there is a big story talking about how company’s are racing to get to the cloud.  So I find the recent “dark clouds” stories about Cirtas and Iron Mountain to be concerning.  Lesson to investors and entrepreneurs get the formula correct because the big enterprises don’t want “science experiments”.  They want proven solutions.  One recent startup that is really doing well in this area is Nirvanix.

Cloud Revolution

The cloud movement is just like the PC revolution, in that it is an economics-based move.  In other words, the price performance of microprocessors relative to mainframes was so overwhelmingly compelling that it  completely disrupted the enterprise business of IBM, Digital, Wang, Prime, and Data General.  However, eventually, as enterprises adopted client/server and microprocessor technology (e.g. Oracle Unix) things stabilized, meaning the enterprise absorbed those technologies and ultimately thrived.

The same is happening here. Cloud startups (e.g. Facebook, Twitter, Zynga,  etc) are serving millions and hundreds of millions of users with a single applications. They can pursue this goal with a homogeneous infrastructure. Enteprises are managing hundreds or thousands of applications servicing tens of thousands of users with incredible legacy heterogeneity.  It will take years for these guys to absorb cloud technologies. So while the NY Times is right about the enteprises racing to catch up, the consumer markets are leading – just as PC markets led and ultimately enterprises will absorbed it.

Startups and leading companies like HP, IBM, Oracle and EMC will be best positioned to sell to those enterprises because they have the relationships and/or have a reliable set of technologies.