Cisco Buys NewScale for Self-Service Clouds

Cisco said it plans to buy newScale, a software provider that allows more control and visibility inside a compute cloud, for an undisclosed sum. The deal highlights the rise in M&A activity among cloud vendors, as well as the need for more accountability in corporate cloud environments that’s occurring as the nature of enterprise computing shifts in response to trends that include cost containment and more agility. It may also signal Cisco’s attempts to do more deals in this space now that it has Lew Tucker, the former Sun Microsystems’ CTO & VP of cloud computing, as the leader of its own cloud efforts.

NewScale offers a self-service portal that lets business users provision their own resources, with the IT department’s policies already built into the experience (i.e., users only have the option of getting what they’re approved to get). As more companies use public or private clouds as development sandboxes, making sure people remember to stop paying for compute when a project is done or that they buy the compute levels appropriate for their department or job is important. This allows an IT department to control those things by setting policies in advance.

For Cisco, which offers servers for the cloud and is part of a partnership to provide modular building blocks for private clouds in conjunction with VMware and EMC, this buy falls in line with its focus on enterprise customers building out private clouds. It’s unclear what this buy means for rPath and Eucalyptus, which have joined up with newScale to create a software stack for private clouds called the NRE. I’ve asked for comment from the respective companies and will update the post when I get them. According to the Cisco FAQs about the proposed deal, newScale will continue to offer its products as part of Cisco and its sales and services team will join Cisco.

Cisco has been very active in the M&A market around its other lines of businesses, but it hasn’t made a lot of cloud buys. My colleague Derrick Harris has written that Cisco may not do that many deals (GigaOM Pro subscription required) preferring to build rather than buy. He writes:

Not every vendor is buying its way into the cloud game, though. Cisco famously built its own Unified Computing System server lineup, and has partnered with VMware and EMC to fill out the virtualization and storage components of the infrastructure stack. Thus far, its only cloud acquisitions have been on the services side (and continued networking purchases), but not operations or software. Don’t count on a big acquisition down the line (although I’ve heard some big names bandied about), but do count on a fair amount of continued innovation, especially with Lew Tucker on board.

NewScale represents a relatively small acquisition, but it does leave Cisco with an open infrastructure as a service strategy that could help change its image of a company that doesn’t do open source software. Assuming the Eucalyptus partnership remains intact, Cisco customers should have the choice to build the IaaS layers of their cloud stacks with the open-core Eucalyptus or, perhaps, with OpenStack. Cisco joined the OpenStack project in February.

Given Cisco’s enterprise focus, it’s likely future deals will involve smaller service offerings that can help make Cisco’s hardware shine, although as low-cost competitors enter its markets, perhaps it should be thinking of pulling an IBM and refocusing its efforts gradually toward a services and software strategy as hardware margins come under pressure. It hasn’t done too well in the consumer market with a software strategy, but maybe the enterprise cloud offers it a new chance.

Update: Jake Sorofman, CMO at rPath, didn’t answer our questions about what this acquisition means for the NRE partnership, but said rPath remains committed to it and expects to see further M&A in the self-service IT delivery sector. From the statement:

rPath is committed to the NRE Alliance as the reference architecture for the enterprise cloud and a best-in-class example of the enterprise cloud tool chain, but we’ll continue to be open and agnostic to wherever this same pattern repeats. For example, in the coming days rPath will announce support for VMware vCloud Director and OpenStack, extending the self-service/automation/elasticity pattern to yet another cloud ecosystem.