One of the first Web outsourcers to extend its offering into enterprise data centers, Loudcloud is now the latest service provider to take things one step further by licensing its automated infrastructure-management software for use behind the corporate firewall.
The company next week will announce the availability of its Opsware automation technology for sale to businesses to use to manage internal infrastructure. Opsware automation technology is the foundation of Loudcloud's managed services offering, enabling functions that previously had to be done manually to be done automatically, thus saving time and improving reliability, the company says.
Industry analysts say the offering should appeal to customers who are looking to manage many servers running standard applications, although it probably wouldn't be a good fit for customized, complex installations. Analysts also suggest the move is an effort by Loudcloud to offset lower than expected revenue from the services side of the business, but that it may be a bit ahead of its time.
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Marc Andreessen, chairman of Loudcloud, told financial analysts in an earnings call earlier this month that customers have expressed a growing interest in using Opsware behind the firewall.
"These companies typically have made a large investment in in-house infrastructure, or for other reasons cannot outsource management of their IT operations," Andreessen said.
In response to the demand, Loudcloud has created a licensed version of Opsware that is similar to the one it uses to provide managed services to hosted customers. The software, called Opsware System 3, includes an Opsware core that runs on Solaris and Linux boxes and provides the overall management piece, and agents that are deployed on the servers being managed. Cost for the software has not been disclosed.
Customers can now use Opsware internally "to automate the management of servers and applications in their data centers," Andreessen said. "They will derive the same benefits from Opsware that we do: lower cost, higher quality, rapid scalability and improved security."
Several customers, including an international insurance firm, a government entity and financial services firm JP Morgan Chase, are already deploying the software, CEO Ben Horowitz said during the earnings call.
The news is not a surprise to industry observers, who say service providers such as Web hosting companies, application service providers and content delivery networks (CDN) are having to tweak their offerings in response to a stagnant economy and changing customer needs.
Loudcloud launched its business about three years ago with a focus on dot-com customers. As dot-coms disappeared, the company had to shift its vision, and last spring introduced Opsware 2i, in which Loudcloud provides remote managed services in enterprise data centers.
Increasingly, however, Loudcloud has found that the enterprise businesses it now targets have huge internal investments and data centers that they are unwilling to scrap, in addition to security concerns. These factors influenced the decision to license Opsware, the company said.
Other service providers have announced expansions of their service offerings. CDN service provider Akamai Technologies, for example, plans to license its software for use behind the corporate firewall. Several application service providers, such as USinternetworking and Corio, have unveiled programs that let customers get the ASP's application management expertise, but keep applications hosted on-site.
Earlier this month, IBM Global Services announced it would begin offering managed hosting services on customer premises.
"It boils down to flexibility [and] making sure you have an offering that meets the needs of a number of customers," says Carrie Lewis, an analyst with The Yankee Group. "IBM is another example. Even the big guys in the marketplace are trying to be flexible and offer these in-house solutions to their customers who aren't fully prepared to outsource the whole thing."
While companies may be reluctant to outsource, they're also looking for ways to make IT management easier as internal infrastructures grow and become increasingly complex, Lewis says.
"The answer is not to throw more people at it. It's to come up with solutions like Opsware that can automate a lot of the day-to-day kind of stuff so that the IT people can focus on the more complex issues and the more strategic issues affecting the company," she says.
But Lewis notes that Opsware is designed for standard application management and not for complex, customized enterprise application deployments.
"This does not replace what Accenture, what IBM, and what the other big outsourcing providers offer," she says. "This is an automated system, and it's designed for doing standard types of things. But it's a good start."
Ahead of its time?
David Tapper, an analyst at IDC, says Loudcloud may be a little ahead of its time with the offering.
"If I were an adviser I would say don't make that move yet," he says. "The tough part is they're so pressured from the revenue side. If they're not making their numbers from the services, what do you do? You find something else that might work."
As for Loudcloud, Horowitz said during the earnings call that licensing Opsware just made sense.
"We believe that market opportunity for [Opsware] is significant and offers a strong complementary offering to our outsourced managed services business," he says.
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