Four years ago, in October 2013, 451 Research reported that OpenStack cloud revenues were approximately $600 million in 2013. In April 2016, 451 Research reported that 2015 OpenStack ecosystem revenues came in at $1.2 billion, with a forecast to grow to $3.37 billion by 2018.
Now in November 2017, 451 Research is out with it latest OpenStack market sizing report, estimating 2017 OpenStack ecosystem revenue at $2.6 billion. Looking forward, 451 Research is forecasting that OpenStack market revenues will reach $6.7 billion by 2021
There’s a few stories out about Canonical, likely centered around some PR campaign that they’re seeking to IPO at some time, shifting the company around appropriately. Here’s some highlights from the recent spate of news around Canonical.
Testing the Red Hat Theory, competing for the cloud-native stack
Why care? Aside from Canonical just being interesting – they’ve been first and/or early to many cloud technologies and containers – there’d finally be another Red Hat if they were public.
Most of the open source thought-lords agree that “there can never be another Red Hat,” so, we’ll see if the Ubuntu folks can pull it off. Or, at the very least, how an pure open source company wangles it out otherwise.
That said, SUSE (part of HPE/Micro Focus) has built an interesting business around Linux, OpenStack, and related stuff. Ever since disentangling from Novell, SUSE has had impressive growth (usually something around 20 and 25% a year in revenue). All is which to, the Red Hat model actually is being used successfully by SUSE, which, arguably, just suffered from negative synergies (or, for those who don’t like big words, “shit the bed”) when it was owned by Novell.
As I’m perhaps too fond of contextualizing, it’s also good to remember that Red Hat is still “just” a $2.5bn company, by revenue. Revenue was $1.5bn in 2014, so, still, very impressive growth; but, that’s been a long, 24 year journey.
All these “Linux vendors,”like pretty much everyone else in the infrastructure software market, are battling for control over the new platform, that stack of cloud-y software that is defining “cloud-native,” using containers, and trying to enable the process/mindset/culture of DevOps. This is all in response to responding to enterprises’ growing desire to be more strategic with IT.
Shuttleworth said “in the last year, Ubuntu cloud growth had been 70 percent on the private cloud and 90 percent on the public cloud.” In particular, “Ubuntu has been gaining more customers on the big five public clouds.”
Its OpenStack cloud division has been profitable, said Shuttleworth, since 2015
Al Sadowski has an extensive report on Canonical, mentioning:
[Canonical] now has more than 700 paying customers and sees a $1bn business for its OS, applications and IT operations software. Time will tell if this goal is realized.
Canonical claims some 700 customers paying for its support services on top of Ubuntu and other offerings (double the 350 it had three years ago), and to have achieved more than $100m in bookings in its last financial year…. [Overall, it’s] not yet a profitable business (although its Ubuntu unit is). We estimate GAAP revenue of about $95m.
On focusing the portfolio, shoring it up for better finances for an IPO:
we had to cut out those parts that couldn’t meet an investors’ needs. The immediate work is get all parts of the company profitable.
To that end, as Alexander J. Martin reports:
More than 80 workers at Ubuntu-maker Canonical are facing the chop as founder Mark Shuttleworth takes back the role of chief executive officer…. 31 or more staffers have already left the Linux distro biz ahead of Shuttleworth’s rise, with at least 26 others now on formal notice and uncertainty surrounding the remainder
Back to Al on the Job to Be done, building and supporting those new cloud-native platforms:
Rather than offering ways to support legacy applications, the company has placed bets on its Ubuntu operating system for cloud-native applications, OpenStack IaaS for infrastructure management, and Docker and Kubernetes container software.
And, it seems to be working:
Supporting public cloud providers has been a success story for Canonical – year-over-year revenue grew 91% in this area…. Per Canonical, 70% of the guest OS images on AWS and 80% of the Linux images on Microsoft Azure are Ubuntu. Its bare-metal offering, MaaS (Metal as a Service), is now used on 80,000 physical servers.
On OpenStack in particular:
Canonical claims to be building 4,000 OpenStack deployments a month at some 180 vendors…. It claims multiple seven-figure deals (through partners) for its BootStrap managed OpenStack-as-a-service offering, and that the average deal size for OpenStack is trending upward.
The Vaughan-Nichols piece outlines Shuttleworth’s IPO plans:
Still, there is “no timeline for the IPO.” First, Shuttleworth wants all parts of the slimmed down Canonical to be profitable. Then “we will take a round of investment.” After that, Canonical will go public.
However, Al’s report says:
It is not seeking additional funding at this time.
Probably both are true, and the answer as Shuttleworth says is “well, in a few years once we get the company to be profitable.
- Al’s report is really good and, as always for him and most 451 reports, thorough as shit. Check it out for lists of customers and more analysis of Canonical’s business mix.
- If you’re into Shuttleworth, Barton George does frequent video interviews with him.
Now that they don’t have to compete with AWS, they have an extra $300m floating around in the spreadsheets:
“Ultimately now it’s about how are we going to build a stronger company. If we don’t have to go spend $300 million a year in capital competing against Amazon, building computing storage and networking, where should we go put that? In things like managed cybersecurity and professional services,” said Rhodes.
On OpenStack, finding the product/market for for private cloud:
And what about OpenStack, the open-source cloud computing platform that Rackspace created with NASA?
“We thought the world wanted another alternative to public cloud,” said Rhodes. “What we are learning is the world doesn’t need another public cloud, so OpenStack is shifting form and going private cloud.”
Also, cameo from my former 451 colleague Carl Brooks.
From Al’s report on the recent OpenStack Summit:
Based on a 451 Research Advisors survey of midsize and large enterprises, increasing operational efficiency and accelerating innovation/deployment speed are top business drivers for enterprise adoption of OpenStack, at 76% and 75%, respectively. Supporting DevOps is a close second, at 69%. Reducing cost and standardizing on OpenStack APIs were next, at 50% and 45%, respectively. The survey further shows diversity in vertical markets using OpenStack, with 80% of respondents being outside the tech industry.
The latest biannual release of OpenStack is Newton, and the community supporting it also shows diversity among the contributors. As of this 14th release, there are 64,549 community members from 187 countries, up from 50,000 six months ago. There are also 643 supporting companies, up from 578 for the same period. Newton also had a record number of developers contribute to the code: 2,581, versus 15 in the first release.
Whitehurst thinks no one is paying enough attention to Open Stack, the freely-available software stack. “We had three deals over a million dollars last quarter,” for Open Stack, said Whitehurst. “We are finally seeing it move into production in a pretty significant scale. Verizon [Communications] and others are running our Open Stack, and so to reach that production point is pretty exciting.”
The company sells a public cloud platform, mostly based on OpenStack, to service providers who want to stand up their own clouds. A sampling of customers thus far from Agatha’s recent report:
the group claims to have deployed more than 1.4 million virtual machines for customers across the board, and enabled the commercial deployments of public cloud (T-Systems’ Open Telekom Cloud), hybrid cloud (Vodafone’s Vodaplex Hybrid Cloud Platform) and HPC (University of Warsaw’s Top500 HPC project’s HPC cluster).
New OpenStack market-sizing and -forecast from old pals at 451:
- Al & Jay say $1.8bn in 2016, going to $5.4bn in 2020.
- Public cloud dominates now, but is expected to switch – “[public cloud providers are] 49% of total OpenStack revenue in 2015. However, we expect OpenStack private cloud service provider revenue to exceed public cloud providers by 2019.”
How they bucket-ize:
451 Research’s Market Monitor focuses on 56 vendors that provide direct OpenStack offerings, including products, services and turnkey offerings around OpenStack deployment and management, different distributions of OpenStack, service providers and training services. Although we do consider some vendors with integrated hardware, systems and software offerings based on OpenStack, our market-sizing estimate does not include hardware-centric revenue, nor does it include revenue from indirect third-party vendors, such as those in storage or software-defined networking.
The OpenStack Summit is in Austin this year, finally! So, I of course submitted several talks. Go over and vote for them – I think that does something helpful, who the hell knows?
Here’s the talks:
- DevOps for Normals – what’s happening as donkeys adopt DevOps – I gave one my first “state of DevOps” style talks back at the Atlanta OpenStack Summit in 2014. We’d just done a little DevOps study at 451 research. Now I give these types of talks a lot, updating them each time with the latest collection of charts and advice.
- Cloud Native Promises in the Land of Continuously Delivered Microservices – this is the talk I have going over exactly what a “cloud platform” is, why you’d care, and what it does for it. More than anything, it’s one of the many attempts to frame up what cloud is: a stack of stuff to help make software delivery better, put another way, the “infrastructure” that makes continuous delivery possible.
- Developer Marketing and Relations: Convincing the “Kingmakers” to give a crap about you – I’ve been trying to put together a panel to talk about developer relations for awhile now. As you may recall, I brain-dumped on that topic into the one (public) long-form report I did at 451 Research. For this panel, I picked a developer (Charles Lowell, The Frontside), a tech journo (Alex Williams, The New Stack), a marketer (Melissa Smolensky, CoreOS), a straight up developer relations person (David Flanders, OpenStack Foundation), and whatever it is I do. This seemed like a good bunch to go over why you’d want to do developer relations, what people do, and what works and doesn’t work.
I’ll be at the Summit regardless, but it’d sure be dandy to do some of the above too.