If an IT trend is legitimate when the old guard, which makes plenty of money selling traditional solutions to risk-averse customers, fully embraces it, cloud computing established its legitimacy during the second quarter. Apart from the countless startups and software companies rolling out cloud products, the past quarter brought full-on infrastructure-as-a-service offerings from enterprise-grade service providers and systems integrators like Verizon Business, Computer Sciences Corp. and Unisys. They will not have the Fortune 1000 customer base to themselves, though, as cloud pacesetter Amazon Web Services continued its march forward with new capabilities, such as auto-scaling, and new products, such as Elastic MapReduce.
However, not all cloud news was good news. The quarter started with an April report by McKinsey & Co. that questioned the true cost-savings of cloud computing, putting cloud providers and pundits on the defensive. The quarter wrapped up with highly publicized outages of Rackspace’s Dallas data center and Google’s App Engine platform. Earlier in the quarter, a routing error at Google slowed service for about 14 percent, and a lightning strike knocked out a small number of servers in Amazon’s EC2 cloud.
We also saw the line between cloud computing and virtualization blur with the long-awaited introduction of VMware’s vSphere 4. Dubbed a cloud operating system, vSphere 4 combines VMware’s ESX hypervisor, a suite of dynamic products and improved performance to let customers create private clouds from their own data centers. VMware has plenty of competition in the private cloud space, however, with everyone from IBM to Platform Computing to open-source startup Eucalyptus announcing products in the past few months.
Then there’s the continuing saga of Cisco’s bold move into the server business. While Cisco spent the second quarter announcing new products and strategies based on its Unified Computing System vision, Cisco’s partners-turned-competitors began distancing themselves from the network leader. HP and IBM, the two most-spurned vendors, each found networking partners that can help them lessen their reliance on Cisco, and that will not try to steal server sales from them in next-generation data centers.
But the biggest news of the quarter involved money – lots of it, in fact. In a move that stunned the IT world, Oracle swooped in and bought Sun Microsystems — snatching it from IBM’s nose — for $7.4 billion. The acquisition opened myriad possibilities, but few details will be known until it closes later this year. The same cannot be said, however, for EMC’s $2.1 billion acquisition of Data Domain. After winning a back-and-forth bidding war against NetApp, EMC can incorporate Data Domain’s industry-leading data de-duplication technology into its portfolio and further extend its lead in the storage market.
The effects of the world’s economic recession also manifested themselves public companies announced first-quarter results. Companies ranging from VMware to Cisco saw both earnings and revenue drop, in some cases plummet, and the overall chip market suffered a nearly 30 percent year-over-year sales drop. Indicative of the momentum of the software-as-a-service and cloud computing, however, Salesforce.com actually saw a 23 percent spike in year-over-year revenues.