What a spate of news to wake up to last Wednesday (April 30th). I’m up at 4:30am to make a flight due for Atlanta and the first headline I see flash across my phone: Red Hat Acquires Inktank Storage for $175 million. Reading this immediately put a big smile on my face for a number of reasons, not the least of which was that those of us in the software defined storage space just witnessed a very small open-source software company get acquired for what appears to be a 20-35x revenue multiplier (those numbers are not official). I immediately put my corporate development hat on and asked myself the following question:
A quick read-through of the press release revealed that the CEO of Red Hat was not quoted nor did he make an appearance on the webcast later on. Instead, Brian Stevens, Red Hat’s CTO, took his place with quotes regarding the acquisition and as acting spokesperson for Red Hat during the webcast. This suggests that the acquisition was a technology play (as opposed to an acquisition motivated by revenue), primarily driven by the office of the CTO.
Red Hat made a similar move in the past. You may recall (or not), Red Hat completed another storage technology acquisition play 2.5 years ago when they acquired Gluster for $136 million. Complex equations show that within the last 36 months, Red Hat has paid $311 million for two software defined storage technologies and their relative experts.
So why double down on storage tech? My guess? OpenStack. Red Hat has bet the house on OpenStack, pumping a ton of resource into successfully developing a burgeoning ecosystem of over 200 partners, an outstanding certification program, and an enterprise ready OpenStack distribution. With OpenStack just now hitting the consumable stage of the maturity curve, guess which use case within OpenStack is the most hardened and ready to stand up at scale…cloud storage.
Add a touch of customer demand for OpenStack with Ceph’s block storage device and BOOM! You have a compelling story to pitch to the board for an acquisition. And someone surely stood before Red Hat’s board and senior management and unflinchingly told them that doubling down on their storage technology investments was the best way to increase revenue for their storage, server, and OpenStack business units.
More Reasons Why This is Excellent News…
For starters, the acquisition validates that the market is ready to consume software defined storage. Storage is going through a dramatic shift and companies like Cloudian and Inktank/Ceph are redefining the landscape to meet the storage needs of the enterprise. Like the flash array market conditions set a few years ago, software defined storage is now a very hot space for innovation and delivery of efficient solutions to customers.
With that in mind, I am compelled to believe that Red Hat’s acquisition of Inktank has fired the gun that set off the consolidation race. Prediction: we will likely see 1-2 more major acquisitions in the storage space over the next 6-18 months. With a revenue multiplier of 20-35x coupled with a huge growth potential bonus, enterprise ready storage companies boasting outstanding technology look extraordinarily attractive.
What Does it all Mean for Cloudian?
It means that we feel pretty good about Red Hat validating the market’s need for new storage offerings by purchasing one. There’s a real momentous change going on in storage and we’re right at the center of that change.
We also believe this will drive more partners into the Red Hat ecosystem and drive adoption of Red Hat OpenStack and Cloudian storage along with it. Cloudian has been working closely with Red Hat on their OpenStack offerings and certified its integration into OpenStack Horizon, Nova, Glance and Keystone . We provide a scalable capacity storage layer for OpenStack and are the leader in Open Hybrid Cloud – acting as the storage fabric between on-premise data and cloud data. Cloudian is the preferred storage solution for large scale environments, multi datacenter storage, and hybrid cloud tiering.
Cloudian and Ceph together provide an optimal solution for scaleable OpenStack deployments. Ceph provides a strong consistency model which means its object/content storage solution can be limited in its ability to address large scale data volumes, multi-site WAN deployments, and hybrid integration with the public cloud. For these types of deployments, Cloudian can drop in at the object storage layer and let Ceph continue to provide outstanding block storage. Cloudian adds enterprise ready features like erasure coding, NFS support, hybrid/auto-tiering, management and QoS tools, and multi-site geo replication. With these and a massive ecosystem of over 350+ HyperStore compatible technologies, Cloudian is well positioned to tackle the enterprise’s capacity and hybrid storage needs.
We’re big fans of Red Hat, be it RHEL, Red Hat Enterprise Linux OpenStack, or Red Hat Storage (including Inktank). Cloudian’s technology complements all of them. With that said, we would like to congratulate our partner on their successful acquisition. Here’s to the next 18 months!
– Steven Walchek, Business Development