Cisco Buys Metacloud As Big Companies Suddenly Hot For Cloud Startups

Cisco announced this morning it intends to buy Metacloud, a startup with OpenStack chops. This news comes hot on the heels of HP buying Eucalyptus last week and Rackspace announcing they are taking themselves off the market this morning.

As Stephen Stills once sang, “There’s something happening here, what it is ain’t exactly clear.”

Metacloud offers OpenStack as a service allowing customers to operate like a public cloud, but inside their own datacenters. The idea is to give companies that same agility, scalability and flexibility you get from public cloud offerings, but instead of being on the open internet, it’s inside a private data center. Metacloud actually also offers a hosted service in the cloud or a hybrid offering for those companies who want a combined offering (which is often the case).

To read Cisco’s explanation of this deal in their release is to get a long list of Cisco buzzwords, particularly that they want to add Metacloud to their “global intercloud,” whatever that means. Reading between the buzzwords though, it appears that Cisco wants a piece of the growing OpenStack action, and who can blame them?

These large companies surely understand that there is a lucrative market in the cloud, and they might not be able to build the tools and technologies they need, so they are buying them instead. In this case, Metacloud gives Cisco an instant OpenStack product to integrate into its cloud product suite. Let’s not forget, it was just last March that Cisco announced its obligatory promise to invest $1B in the cloud. HP made a similar announcement in May.

Now both companies have invested in cloud startups within a week of each other. It’s enough to make you believe they are actually competing with one another. Yet all three companies in this report -Rackspace, HP and Cisco -are struggling to gain traction in a highly competitive market.

When it comes to the cloud, the three public cloud giants–AWS, Google Cloud and Microsoft Azure–have a huge marketshare lead. OpenStack was originally launched by RackSpace and NASA as a way to combat the growing power of these public vendors, particularly AWS which dominates the market.

In OpenStack, there is a battle going on between Red Hat, IBM, HP and others, and now Cisco with this purchase proves it wants a piece of this action too. It could be that with no clear OpenStack market leader these large companies recognize a market opportunity when they see it.

It probably also means we can look for more purchases because one thing clearly leads to another and when one player makes a move, the others have to counter. It could be a good year for cloud startup exits if this trend continues.

For now, we know the market is shifting as the big players jockey for position and start scooping up smaller pieces they think they can help their cause. Unfortunately, consolidation usually means the end of innovation, but in a fast-moving startup environment, the cycle could begin anew very quickly.