Sun Seeds Cloud Business with Q-layer Acquisition

| Jan 13, 2009 | Application Infrastructure | Competitive Intelligence Report

| Analyst: Michael Meehan

Current Perspective: Very Positive
Vendor Importance: Very High
Market Impact: Moderate

Event Summary

January 7, 2009 -- Sun Microsystems, Inc. announced it has acquired Q-layer, a cloud computing company that automates the deployment and management of both public and private clouds. The Q-layer organization, based in Belgium, will become part of Sun's Cloud Computing business unit which develops and integrates cloud computing technologies, architectures and services.

Analytical Summary

• Current Perspective: Very positive on Sun Microsystems’ acquisition of Q-layer because it provides the infrastructure software needed to jumpstart Sun’s cloud computing division, which, prior to this deal, was more a statement of intent rather than an actual business division. Q-layer offers relatively mature software in this space, with separate products targeted at enterprise users and service providers, giving Sun’s Cloud Division both product and a target audience to pursue.

• Vendor Importance: Very high to Sun because establishing a cloud infrastructure at the user and service provider level is essential to enabling the IT services and support revenue model Sun wishes to establish. Over the last twelve months, Sun’s product revenues have dropped, while its services business has remained flat. The company has to get in front of the next wave of IT innovation and find a new channel through which it can acquire customers. Cloud computing represents both those things, and Q-layer will be the fulcrum for all of Sun’s cloud computing initiatives.

• Market Impact: Moderate on the Middleware Software and Services market because Sun will not be able to cause an immediate disruption via its cloud computing activities. Competitors will have time to experiment with their own cloud strategies, while Sun attempts to build and leverage its own cloud infrastructure. Many large vendors – such as IBM, Oracle and HP – will be able to partner with Sun in order to enhance their own set of in-cloud offerings. Microsoft should beware that Sun potentially can put together office productivity and Java development cloud services capable of eroding Microsoft’s Office and .NET license bases.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

| Client access - Full report in Application Infrastructure | More information

Recommended Competitor Actions

• Microsoft should consider this acquisition to be very threatening. Sun has an office suite and the potential to put modular Java bundles in the cloud. The challenge cloud-based services pose to Microsoft Office is that Microsoft can only lose market share even if it scores relative success in the cloud. Sun and Google are poised to predate Microsoft Office’s absolute dominance. On the Java side, it marks yet another area where Java stands to reach a wider audience than .NET.

• Oracle should welcome this move by Sun and work to make the Data Center Abstraction Layer in NephOS a first-class citizen with Oracle 11g. Sun surely will work to make key MySQL features translate to the virtual data center, and Oracle should do the same in order to retain customer satisfaction, particularly with users building private clouds that leverage enterprise database technology.

• Middleware and BPM vendors who haven’t re-architected their products to function as OSGi bundles (particularly Software AG, Progress and TIBCO) need to move quickly in that direction in order to ensure developers and architects can use their technology inside self-constructed, project-specific software labs. Infrastructure-as-a-service will not be far behind the cloud-based data services.

• IBM’s cloud initiative has focused mostly on building the physical data centers and on cloud-based social networking tools (Bluehouse). While Sun will be a competitor in those spaces and holds a momentary advantage in offering a virtual data center thanks to Q-layer, IBM should work with Sun’s cloud division in order to attack the Windows, Office and .NET license bases at Microsoft.

• HP should partner with Sun in order to leverage Q-layer with the physical data centers it has been building in competition with IBM. HP does not need to trouble itself with building the market for cloud infrastructure software. It can partner with vendors like Sun, ideally through the HP Services division, and avoid moving into a software market that is not yet established.

Recommended Competitor Actions

• Enterprise IT shops should be conducting cloud trials, whether they be office productivity applications, virtual data centers or portal services. Sun’s entrance into the market only strengthens the case to move deeper into a pure Internet-based computing paradigm. Absolute fledglings in the cloud space should wait to purchase infrastructure software like Q-layer until they have gained some cloud experience via free, or nearly free, trials.

• This acquisition serves notice that cloud computing will have a fairly dramatic effect on data administration and storage over the next five years. Users do not have to worry about an immediate migration, but should undertake a thorough cataloging of their data architecture, resources and costs with an eye toward migrating to a more efficient virtual data center environment.

• The more an enterprise moves into cloud-based services, the greater the stress the cloud will place on its Internet infrastructure. Wider pipelines, quicker connectivity speeds and guaranteed uptime will be critical network requirements for a cloud-centric enterprise.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

| Client access - Full report in Application Infrastructure | More information

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