Canonical refocusing on IPO’ing, momentum in cloud-native – Highlights

Canonical Party

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.

Canonical momentum

From Steven J. Vaughan-Nichols:

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.”

And:

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.

And:

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.

Strategy

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.

On IPO’ing

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.

More

Red Hat OpenShift Momentum – Highlights

Brian Gracely of Red Hat (and formally an analyst who did some of the best “cloud-native”/cloud platform work early on) has a momentum post on Open Shift. Here’s my highlights:

Sizing up revenue and deal-size:
[Q3, FY 2017] Also of note, we closed our second OpenShift deal over $10 million and another OpenShift deal over $5 million. And significantly, we actually had over 50 OpenShift deals alone that were six or seven figures, so really strong traction. [Q4, FY 2017] with our largest deals in Q4 approximately one-third had an OpenShift container platform component.
Red Hat hasn’t yet been too clear on OpenShift revenue, so you have to tea-leave out these revenue spreads, which I haven’t really done. Earlier in April, Jeffrey Burt at The Next Platform had this to say:
During the final three months of last year, subscription revenue for Red Hat’s application development-related [JBoss, etc] and other emerging technologies – which includes OpenShift – hit $125 million, a 40 percent increase from the same period in 2015, and revenue for the group accounted for about 20 percent of Red Hat’s overall revenues for the fourth quarter.
Today, we also announced that Barclays Bank, the Government of British Columbias Office of the CIO, and Macquarie Bank are also using Red Hat OpenShift Container Platform to modernize application development…. airplane manufacturer Airbus about their DevOps journey, and digital travel platform Amadeus about their transformation of handling 2,000x the number of online transactions…. how Amsterdams Schipol Airport (AMS) is using OpenShift to redefine the in-terminal travel experience, how Miles & More GmbH is better managing rewards programs for travelers, and how ATPCO is rethinking how they publish fare-related data to the airline and travel industry.
Much of the write-up focuses on community momentum, true to Red Hat, open source form:

The OpenShift Commons community has 260+ member organizations….

Red Hat engineers lead or co-lead in 10 of the 24 Kubernetes SIG activities.
Finally, some commentary on their strategic shift to Kubernetes:
The huge architectural shift that we made a few years ago in adopting open standards for containers and the Kubernetes container scheduler has allowed us to delivered a unified platform to containerize existing applications and deliver agility and scalability for cloud-native applications and microservices. We call this combination Enterprise Kubernetes+, or Enterprise-Ready Kubernetes.
Red Hat’s OpenShift is, of course, a competitor to us over at Pivotal.