By Charles King, Pund-IT, Inc. September 24, 2014
Mergers and acquisitions (M&A) has an oddly high profile in the IT industry. Why odd? Because while companies in virtually every other industry certainly pursue and publicize significant deals, more than a few folks in IT seem to regard M&A with quasi-religious reverence.
In large part, that’s due to the reputation for transformative innovation enjoyed by small companies and start-ups that are often M&A targets. Buying those forward-thinking organizations, their products and intellectual property (IP) assets can allow the acquiring vendor to join the market and begin monetizing its investment in a fraction of the time required by organic (internal) research and development (R&D) efforts.
That’s a very big deal if and when it works, but it tends to obscure an important related issue: the positive impact that new executives and personnel can have on the acquiring company. Those benefits certainly aren’t automatic or even considered sometimes. For example, Microsoft’s high-profile $2.5B deal for Minecraft developer Mojang was completed despite the fact that the company’s founders, including the “father” of Minecraft, Markus “Notch” Persson, are moving on “to start new projects.”
But in many or even most other M&A deals, keeping in-house executive talent is a very high priority. That is certainly the case in a recent acquisition by HP that intends to bolster the company’s position in private and hybrid cloud markets, and OpenStack development.
That HP deal was for Eucalyptus Systems, a provider of open source software for building private and hybrid clouds for enterprise customers. After the transaction closes, Eucalyptus’s CEO, Marten Mickos, will become SVP and GM of the HP Cloud organization, and will report directly to company CEO and president, Meg Whitman. In that role, Mickos will be responsible for building out the HP Helion portfolio, based on Open Stack technologies.
Why is this a big deal for HP? For both tactical and strategic reasons.
First, Eucalyptus has been successful in commercial cloud with organizations, including NASA, Nokia, F-Secure, AppDynamics and Cornell Red Cloud using its software. Those are good names to have on your customer list, especially for so modestly sized (70 employees, give or take) an organization.
In addition, Eucalyptus’ cloud platform is compatible with Amazon Web Services (AWS), supporting workload mobility between AWS and Eucalyptus-based private clouds. That inbuilt functionality allows customers ready for hybrid cloud environments to get up to speed relatively quickly and seamlessly. In fact, both F-Secure and AppDynamics are using Eucalyptus and AWS solutions to do just that.
Along with Eucalyptus’ active workforce (all of whom will be offered jobs by HP), the most obvious personality in the deal is Mickos, a respected leader in the cloud industry and a longtime open source player. In fact, Mickos was the CEO of MySQL from 2001 to 2008 when the company was acquired by Sun Microsystems, and left after serving for a year as Sun’s database group SVP (a year or so before Sun was acquired by Oracle). Mickos joined Eucalyptus as CEO in March 2010.
In Mickos, HP is gaining not only an executive with deep industry experience and technical expertise but one with a solid rep and longstanding relationships in open source communities and efforts. That is an especially important point in hybrid cloud where most vendors, including HP, are leveraging open source technologies and frameworks, particularly OpenStack, to support heterogeneous programming languages and tools.
In short, buying Eucalyptus provides HP innovative technological and human assets that will be immediately beneficial in the company’s cloud efforts and should also play key roles in HP’s long term success.
HP’s Cloud Connection
It should also be noted that Mickos is just the latest key executive to join HP’s cloud organization. In July, the company hired Rackspace’s SVP of products and engineering, Mark Interrante, to become SVP of engineering for HP Cloud. We discussed Interrante’s hiring in greater detail in the July 16th issue of the Pund-IT Review, but a key point of HP’s interest in Interrante was his work at Rackspace as a founder and early developer of OpenStack.
At HP, Interrante will be responsible for Cloud R&D for all HP Helion OpenStack products, HP Public Cloud engineering, and building HP Cloud’s emerging PaaS and Development Platform capabilities. In other words, he will now work side-by-side with Martin Mickos, and both will be key players in the development of HP’s Helion portfolio, its OpenStack efforts and HP Cloud’s strategies and solutions.
Acquired organizations and products can certainly benefit acquiring companies, especially in terms of delivering near-immediate commercial opportunities. But at the same time, the human side of innovation – the executives, engineers, developers and business line employees who initially develop, launch and then keep fledgling technologies aloft – can provide equally valuable or even greater, long-lasting benefits. That certainly seems to be the case in HP’s recent efforts to bolster its Cloud group, Helion Portfolio and OpenStack involvement.
That doesn’t mean that such deals are necessarily, let alone automatically successful. Despite the best of intentions, new professional relationships don’t always grow and flower as planned. In spite of good will and hard work, carefully planned journeys don’t always reach their hoped for destinations.
But overall, in acquiring Eucalyptus and in hiring both Martin Mickos and Mark Interrante as SVPs of HP Cloud, the company is underscoring the importance of open source and OpenStack in cloud evolution, and placing bets on executives whose experience in those areas is likely to deliver significant benefits over the long term. It should be noted that no wager is a sure thing, but in Mickos and Interrante, the odds seem to be on HP’s side.
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