HP Rattles Amazon's Cage, Solidifies Hybrid Cloud Strategy With Eucalyptus Buy

Hewlett-Packard said Thursday it's acquiring Eucalyptus, an open source private startup that's helmed by former MySQL CEO Marten Mickos and has close ties to Amazon Web Services.

Eucalyptus sells software for building private clouds that support AWS' application programming interfaces (APIs), which means customers can move workloads back and forth between their data centers and the AWS EC2 public cloud. This scenario is known as "hybrid" cloud and it's the path many enterprises are taking to the cloud.

HP partners are calling the deal a bold move to show that it's committed to an "open" hybrid cloud strategy -- i.e. one driven more by customers' needs than competitive concerns.

[Related: HP Drops EC2 API Support, Puts Stake In Ground Against Amazon's 'Spider Web']

HP CEO Meg Whitman, in a memo sent to HP employees Thursday that was viewed by CRN, said buying Eucalyptus fits with HP’s strategy to "help businesses build, consume and manage open source hybrid clouds."

"This is an exciting time for HP’s cloud business and we're already building momentum in this space," Whitman said in the memo.

When the deal closes, Mickos will join HP as senior vice president and general manager of HP’s cloud business, reporting to Whitman.

Martin Fink, who has been running HP's cloud business, will keep his roles as CTO and Director of HP Labs, and will also continue to oversee HP's Network Functions Virtualization (NFV) business, Whitman said in the memo.

Terms of the Eucalyptus deal weren't disclosed, but sources told Re/Code it’s less than $100 million. That would make it Whitman’s largest acquisition since taking over as HP CEO three years ago this month. HP expects the deal to close in the fourth quarter of its fiscal 2014.

Eucalyptus, of Goleta, Calif., has billed itself as the only vendor that has a formal business relationship with AWS. That's an important distinction, as AWS executives are constantly proselytizing that public cloud can handle anything enterprises need to do, and that private clouds are expensive and unnecessary.

HP would obviously prefer that its customers use its own public cloud, but like many enterprise vendors, it has many customers running workloads on AWS.

With Eucalyptus, HP now has a way for customers to move workloads back and forth between AWS and private clouds built on its Helion line of OpenStack products, unveiled in May.

"Eucalyptus has the magic sauce of AWS compatibility, enabling them to move workloads to private or public clouds without application changes. This means you are going to now get that functionality in Helion, and it’ll be easier to move applications from AWS to Helion," Jed Ayres, chief marketing officer at Cleveland-based HP partner MCPc, told CRN.

NEXT: How Partners Think Eucalyptus Will Spark Sales Discussions

Ayres said he sees the HP-Eucalyptus deal opening up more sales conversations around the HP Helion cloud offering.

"It creates a bridge to move workloads from Amazon to HP Helion, and strengthens the HP cloud story. What customers are looking for is flexibility. Nobody wants cloud lock-in," Ayres said.

HP has previously moved to protect customers from this sort of entrapment. Last December, HP stopped supporting AWS EC2 application programming interfaces (APIs) in its public cloud, and one of its executives described AWS as a "spider web" that traps customers that use the service.

"We have made a decision based upon significant input from developers and customers that we will no longer provide the EC2 API within the HP Cloud environment," Roger Levy, vice president of technical operations for HP Public Cloud, told CRN at the time.

Chris Harney, director of emerging technologies for Portsmouth, N.H.-based HP partner Axis Business Solutions, said adding open source rock star Mickos will give HP’s cloud strategy a big boost.

"I am sure Mickos will have free rein and that he’ll continue to do his own thing," Harney said.

Eucalyptus has raised $55 million in three funding rounds from New Enterprise Associates, Benchmark Capital, e.ventures and Institutional Venture Partners.

PUBLISHED SEPT. 11, 2014