Big VARs vs. the Cloud: What Will Happen?

What awesome news. OpSource just got acquired at a premium by Dimension Data, itself a part of NTT. I’ve been an OpSource fan since Treb Ryan founded it as an MSP about a decade ago. Treb’s previous company, SiteSmith, was a major competitor to Mark Andreesseen’s company LoudCloud, which morphed into Opsware before it got acquired by HP. I took a hard look at acquiring SiteSmith for Exodus Communications and would gladly have done the deal if AboveNet hadn’t swooped in with an acquisition price so stratospheric it made my nose bleed. But I really liked Treb because he understood operations better than anyone else I’d worked with.

That’s why Opsource invested in building the most advanced networking virtualization and security of any major cloud player; it was their differentiator. They also solved the operations problem. It’s easy to spin up an instance on Amazon Web Services, but it’s not as easy to monitor and manage it 24/7. Treb also understood that and hired a bunch of my colleagues from Exodus Communications, among others, and launched a managed offering that attracted big customers like acrobat.com.

So kudos to the team at OpSource! Nice work.

Likewise, DiData made a great decision. CEO Jere Brown said in an interview with CRN that acquiring OpSource will help DiData sell more services and take a step back from traditional product sales. You’d think that if you had a ton of software engineers and a massive budget like DiData, you could just build your own cloud software and launch a service.

You’d be wrong. In the late 90’s, tons of VARs started building MSP offerings as a way to get higher margins, then most of them failed because running a cloud is very different from writing software to automate a cloud. We’re seeing some blending of those two with devops, but history shows that it can take many years to transition from being a software and consulting company into being a successful, profitable cloud provider. That’s why DiData made the right call in acquiring a cloud provider.

I do wonder if every SI out there will try to start a cloud. I hope not because I don’t want to see a repeat of the late 90’s VAR to MSP debacle. It makes far more sense for every telco with facilities will start a cloud, although to be honest I am not convinced that will fly either for some, because telecoms are not traditionally innovative in the area of application level operations.

The OpSource team must be pretty excited – getting access to DiData’s customer base is a dream come true. In fact, CRN quotes OpSource CTO John Rowell as saying, “This is straight up a growth services buy for Dimension Data. They want to be in the cloud services business. They want to accelerate their cloud strategy and get the cloud out to end customers.”

From an enterprise relationship perspective, Amazon Web Services is far, far behind DiData. It’s definitely been an interesting week in the cloud!