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On Friday, Eucalyptus Systems, the open source software powering the private clouds in the enterprises, announced that the former CEO of MySQL AB, Mårten Mickos, has taken over as CEO of Eucalyptus Systems replacing Woody Rollins who will now be their CFO. This has taken the entire industry by surprise. I am also equally surprised because I just spoke with the Eucalyptus team including Mr. Rollins on wednesday and I got no clue about their impending move. In this post, I will briefly talk about Eucalyptus Systems and what this move means to them.
Eucalyptus started off as an NSF-funded academic research project at the University of California, Santa Barbara, developed by a team of researchers headed by Dr. Rich Wolski. They started Virtual Grid Application Development Software Project to develop a programming language and runtime system techniques for large-scale computational grid applications. At the same time, Amazon EC2 was gaining traction and they wanted to see how AWS can be tapped for their project. In order to do this, they developed Eucalyptus software to act as a local cloud platform. Essentially, they developed a platform that we call in today’s terminology as Private Clouds. They built their platform on top of unmodified open source components so that they can incorporate any future upgrades without any hassle and, also, run on top of any existing Linux distributions. From the beginning itself, they made a conscious decision to develop a modular platform so that it can be integrated into many different virtualization environments. Even though they supported only Xen (and, hence, the support for AWS) in the beginning, this decision to have a modular architecture is allowing them to support other virtualization platforms like KVM, VMWare, etc.. When I asked them about the support for Microsoft’s Hyper-V, they told me that they are looking into ways to integrate with Microsoft’s hypervisor.
From its academic roots, Eucalyptus Project morphed into a commercial entity with the name Eucalyptus Systems, supported by a $5.5 million Series A funding from Benchmark Capital. Once it became a commercial entity, they quickly expanded to add support for third party management tools like Rightscale, CohesiveFT, rPath, Ylastic, etc.. They also partnered with Canonical to support Ubuntu Enterprise Cloud. In Sept. 2009, they launched their first commercial offering, Eucalyptus Enterprise Edition, that offered support for VMware’s vSphere, ESX and ESXi. With this move, Eucalyptus announced their intention to take on the enterprise market. They expanded their offerings with partnerships with newScale and Terracota. The Ubuntu Enterprise Cloud 9.10 accelerated the adoption of Eucalyptus with a tighter integration which made the installation of Eucalyptus cloud a breeze.
The Eucalyptus strategy is simple. They will offer their core product for free and monetize with proprietary addons and support. Their addons with open source platforms will continue to be free but any addon/adapter with proprietary technologies is going to cost money to the users. It is a neat way to monetize an open source software and they are finding an enthusiastic response to this strategy. I did prod them to give out some numbers on the enterprise customers they have but they refused to disclose anything. However, they told me that they are very optimistic and they are in a strong position to close the sale with many enterprise customers.
Having seen the evolution of Eucalyptus Systems, let us take a look at the impact of the announcement of their new CEO. In my opinion, it is a smart move considering the role played by Mickos with MySQL. First and foremost, Mickos showed the world how an open source company can successfully monetize even while giving away the software for free. He was part of the MySQL team that helped grow the revenues from 14 Million in 2004 to an estimated 65 Million in 2008. In the business world, where the CEO’s words are filtered through their PR, he was brave enough to accept that MySQL gets one paying customer for every 1000 downloads. He was pretty clear about where he wants MySQL to go and the constraints it faces as an open source company. This will come very handy as he tries to steer Eucalyptus in a cloud world dominated by proprietary vendors.
MySQL started off as a darling to web developers and continuously tried to reposition itself as an enterprise player in a market dominated by Oracle, IBM and Microsoft. Mickos played a very important role in that repositioning and helped MySQL convince enterprise to take them seriously. In fact, strong database players like Oracle and IBM saw this smaller open source vendor as a long term threat to their business. Mickos helped MySQL navigate this competitive marketplace and this experience will come handy as he helps Eucalyptus Systems navigate a competitive marketplace dominated by some strong players.
Sun Microsystems surprised many pundits with its 1 Billion acquisition of MySQL. Even though it was a big surprise to many at that time, we cannot overlook the role played by Mickos that resulted in the high value deal. As he tried to thrust MySQL into the enterprise, Oracle tried to grab MySQL into its fold but Mickos pooh pooh-ed the attempt by Oracle and pushed MySQL ahead. Eventually, his team convinced Sun Microsystems to play a fortune to acquire them. In fact, many pundits are already wondering why Eucalyptus Systems is not acquired by one of those bigger players. I see the appointment of Mickos as CEO to be the first step towards such an endgame. This man knows how to do it. His experience in taking a small open source company across a competitive marketplace resulting in a $1 Billion paycheck will go a long way in taking Eucalyptus Systems towards a big acquisition. Plus, Mickos is not new to the cloud marketplace and he must be having a fairly good idea of the marketplace since joining Rightscale’s board as one of the directors. I am sure Benchmark Capital took all these into consideration before putting him on the driver’s seat at Eucalyptus Systems.
The next few years will be crucial for Mickos as well as Eucalyptus Systems. They need to show the world that they can monetize their product successfully by establishing a larger footprint. Then they need to use all the available skills, including that of Mickos, to find a buyer who can give them a fat paycheck. In my opinion, the process has already started and we have to wait for the endgame.