Is There a Real Market for ‘Enterprise PaaS?’

Cloud provider Tier3 announced this morning that it has secured $8.5 million from Ignition Capital and Madrona Venture Group to fund its “enterprise platform-as-a-service” offering, a term that might not be entirely accurate, but that is indicative of a growing trend in cloud marketing. Assuming that enterprise customers looking at public clouds for their important applications want the convenience of an Amazon EC2 (a amzn) with the peace of mind of a Terremark, there’s an opportunity for cloud providers looking to take a risk and court big contracts while potentially alienating developers and smaller deals. In fact, Tier3 might already be in good company.

Just yesterday, in fact, I had a call with Virtustream, a Maryland-based cloud provider with a laser focus on enterprise applications, such as ERP software from SAP, Oracle and Micrsoft, that positions its sweet spot as the “enterprise cloud.” Its xStream cloud service comes in a variety of flavors — including on-premise — and with a very unique pricing model based on businesses’ specific needs and desires. But the company believes customers can get the best product for their money in terms of performance, elasticity, security and simplicity by using what Virtustream calls its enterprise cloud model, which is publicly hosted but not multi-tenant. The company raised $40 million from Columbia Capital, Blue Lagoon Capital, Intel Capital, Noro-Mosely Partners and TD Funds during a rolling funding round throughout 2009 and 2010.

In January, I detailed GoGrid’s new offering called Hosted Private Cloud, wherein customers can actually rent physical infrastructure on a pay-per-use basis just like traditional virtual cloud resources. As GoGrid CEO John Keagy told me then, this service is part of his company’s focus on securing bigger deals rather than lots of developers. OpSource appears to be going down a similar path by offering the advanced networking and security capabilities of its Cisco gear and VMware virtualization to customers while maintaining much “credit-card cloud” simplicity.

For its part, Tier3 doesn’t appear to fit ideally into the PaaS model as it positions itself — it looks far more like an IaaS offering — but it definitely targets enterprises. Its Premium Servers option is the strongest, promising a high SLA, disaster recovery, 14 days worth of NetApp  backup, and a variety of other features, including premium physical and software infrastructure. Yet, it still offers automatic scaling, dynamic allocation and other features often considered part and parcel with cloud computing. Like the other cloud providers mentioned here, it also relies on its past as a managed service provider to assure customers it knows how to build architectures for and manage their mission-critical applications.

What ties all of these cloud providers together is that they’re attempting to strike a balance between the simplicity and easy access of clouds like AWS and Rackspace while adding their own unique enterprise flair in terms of hardware, SLAs, pricing, disaster recovery, etc. Of course, they also generally come with higher price tags, which makes the already-complicated “cloudonomics” even trickier. It’s generally accepted that cloud computing is more expensive than on-premise computing in terms of running the same number of servers for the same period of time, but there many other factors to consider that could make the cloud look like the way to go. A higher price off the bat might mitigate the persuasive power of these additional factors. So might even more new — and low-priced — features from AWS or broad adoption of private cloud software from enterprises. Much private cloud software also offers the capability of managing cloud-based resources, but it’s generally limited to AWS and a few other providers, and usually not Virtustream, Tier3, OpSource, or other “enterprise-friendly” providers.

But I’ve spoken with many of these providers, as well as VMware vCloud partners, Terremark and others targeting large-business customers, and they all claim to have some major customers under their belts already. So, maybe there really is a separate cloud market shaping up, with a marketplace of customers ready to pay for the perfect blend of cloud computing tenets and enterprise-grade performance, reliability and security. It’s a bit riskier to rely on bigger deals rather than broad appeal in an overall market as young as cloud computing, but the reward is there for providers that can close them.