Today Cit­rix announced the acqui­si­tion of Cloud.com.  Cloud.com is clearly a leader at pro­vid­ing an alter­na­tive to VCloud, and one based on Open Source and stan­dards. They aspire to be the “Red Hat” of Open­Stack.  From this per­spec­tive, they fit will into the Cit­rix Cloud ini­tia­tives. But all that said and done, I think it’s worth ask­ing the more dif­fi­cult ques­tion about the mar­ket. Who buys Cloud plat­forms and why?

Some years ago, Microsoft argued that there was only a need for a small num­ber of Cloud fab­rics because of the economies and mar­ket value of scale. Oth­ers argued that there would be tens of thou­sands of Cloud SP’s, each serv­ing some valu­able niche based on plat­form (Iaas, PaaS, SaaS), local­ity and ver­ti­cal. The later argu­ment is the basis of the energy in the mar­ket. Clearly if Microsoft is lit­er­ally right then there ulti­mately isn’t much of a mar­ket for some­thing like Cloud.com.

To try and under­stand this inter­est­ing ques­tion bet­ter, we’ve actu­ally talked to a num­ber of SP’s. We found some SP’s that hadn’t thought about the nuances much but also quite a few that had. The knowl­edge­able ones didn’t think that com­pet­ing with Ama­zon for what AWS does well was an inter­est­ing busi­ness oppor­tu­nity, view­ing it instead as a “race to the bot­tom.” They were pretty uni­formly focus­ing insted on some more spe­cific offer­ing, often based on a higher level plat­form (e.g., sup­port­ing SaaS offer­ings) rather than offer­ing rented VM’s.

Now here is where it gets inter­est­ing. Many of these more sophis­ti­cated SP’s also won­dered whether over time it would make more sense to build those offer­ings on some­thing like AWS or Azure rather than hav­ing their own under pin­ing fab­ric. So it’s pos­si­ble that in an impor­tant sense Microsoft might be right. The world may only need a rel­a­tively few fab­rics, just like we need a rel­a­tively few power grids or tele­phony sys­tems. At the same time, those who argued that 10,000 SP’s would bloom might be right too, pre­sum­ing they build on those mas­sive fabrics.

Cit­rix didn’t dis­close the price of the acqui­si­tion so it’s fair to assume it wasn’t lit­er­ally a big deal since it isn’t mate­r­ial to Cit­rix stock­hold­ers. If that’s true, the indus­try also may aslo believe that ulti­mately the mar­ket for Cloud.com was limited.