Infrastructure Winners and Losers of 2009

1Executive Summary

As the year winds to close, GigaOM Pro’s crack team of contributors takes a look back at what went right, what went wrong, and for whom.

Winners

Cloud Computing

2009 was the year in which the cloud-computing discussion evolved from “What is this?” to “How can I best use this?” The preceding yearlong debate over the definition of cloud computing helped ease this transition, as did the emergence onto the cloud scene of experienced, trusted IT vendors and service providers. Amazon Web Services might have kicked off the cloud discussion, but IBM, Microsoft, Cisco and VMware (as well as others of this ilk) — all of which ramped up their cloud offerings and rhetoric this year — legitimized it. Not that Amazon shouldn’t be taken seriously: Still the measuring stick for cloud computing, the company unveiled a slew of features in 2009 that enhanced its functionality and addressed concerns over security, reliability and cost.

Even negative press over outages and failures was overshadowed by instances of real-world usage. Salesforce.com continued to increase its profits despite the dismal economy, and in September, the U.S. government launched its much-anticipated cloud-service catalog, Apps.gov. — Derrick Harris

EMC

What economic downturn?  Despite a third-quarter storage software market that saw revenue plunge nearly 8 percent from a year ago, EMC was one of just two major vendors that grew its business. (IBM was the other.) This past summer, the world’s No. 1 storage company demonstrated its readiness to defend its title by outbidding NetApp for data de-duplication leader Data Domain. Companies don’t spend upwards of $2 billion in this economic climate — or any other for that matter — without a good reason. In EMC’s case, Data Domain strengthens its portfolio as IT shops struggle with keeping energy bills in check and managing storage infrastructures that are experiencing 50 percent yearly capacity growth rates.

Also this year, EMC provided momentum for unified computing by teaming with networking giant Cisco on Virtual Computing Environment and Acadia.  While some companies are wary about Cisco’s encroachment, EMC clearly sees that the winds are blowing in the direction of heavily virtualized and cloud-keeping data centers. — Pedro Hernandez

Data Centers

datacenter_sunguardavailabilitysvcsIn 2009 much of the real estate market was down or flat, but not if it boasted raised floor space, some powerful chillers, and access to abundant power. Demand for co-location space rose, and large vendors, from Microsoft to the National Security Administration, built new homes to house their servers.

When Cisco launched its own servers, it added some much-needed drama to the world of vendors whose boxes are the hearts and brains of the data center. Suddenly we saw alliances formed between traditional server vendors and the networking guys, with IBM cuddling up next to Juniper and Dell getting cozy with Brocade. HP, on the other hand, bragged about its own networking chops and in a surprise move bought 3Com in November.

Figuring out who is building out data centers with what types of gear or how they are architecting the space to offset high demands for energy are now the subject of widely read white papers and media reports. In short, data centers were sexy this year, packed with all the drama of a soap opera. — Stacey Higginbotham

Hadoop

Hadoop, the open-source framework that makes it possible for crunching massive data sets with relative ease using low-cost commodity hardware, is seen as one of the catalysts of the data-mining renaissance.  Hadoop was inspired by Google’s MapReduce, a way to take complicated problems, break them apart, and spread them across many different computers. Hadoop does precisely that, except it’s developed and distributed under open-source principles.

It’s particularly useful now because consumer Internet companies and large corporations are increasingly collecting more and more information about their users, customers and suppliers. They are simply awash in data. To mine this information and layer it with business analytics is an expensive and tedious process. It’s expensive because most of the solutions come from large behemoths such as Teradata.

In the 1990s, the open-source community focused on lowering the cost of web infrastructure by moving away from proprietary software platforms; today the focus is on data and using it smartly. The next big opportunity is in unlocking the data, mining it for intelligence, and analyzing it. Hadoop is perfectly suited for such purposes. No wonder it’s finding a diverse array of takers — from web startups to smart-grid operators.  — Om Malik

Rackspace

Cloud computing wunderkind Rackspace keeps chalking up wins. The company, which specializes in allowing customers to store data online rather than on their own servers, was named a “Conviction Buy” by Goldman Sachs earlier this month, with analysts predicting that its revenue will rise 28 percent next year. The company is not only well-positioned to benefit organically from the rise of cloud computing, but is making shrewd ancillary moves.

Rackspace has recently revamped its channel partner program, offering partners more compensation and support than ever for offering its hosted services. It’s also increasingly specializing in key cloud-based services for businesses, such as inexpensive hosted email. Cloud-based email, and other hosted services, can save businesses substantial amounts of money and keep them from having to deal with security headaches. Cloud hosting and services will continue to be competitive next year, but we foresee healthy growth for Rackspace.   — Sebastian Rupley

Losers

Intel

intel2009 may be the year that Intel’s near monopoly in and sole reliance on the x86 market caused it some pain. The monopoly has led to a $1.25 billion settlement announced in November with rival AMD, but the Federal Trade Commission is still asking questions about Intel’s licensing relationship with Nvidia, which has claimed that the world’s largest chipmaker is trying to make sure that Nvidia’s graphics processors don’t work with its latest generation of chips.

Meanwhile, its success with its low-power Atom chip in netbooks may be cutting into sales of its higher-end chips for personal computers, laptops and even in servers. A big server customer complained about the big chipmakers and server manufacturers not meeting its compute needs.

As if being a victim of Atom’s success and customer dissatisfaction weren’t enough, Intel also came up against the limits of its x86 architecture. As mobile became more important, ARM, the company that licenses the rival ARM instruction set, scored a few customer wins for netbooks (it calls them smartbooks) while Intel failed to bring its x86-based Larrabee graphics chip to market. — Stacey Higginbotham

Openness

Despite all the decrying of vendor lock-in in the data center and provider lock-in in the cloud, 2009 comes to an end with openness still looking like a pipe dream. In the data center, the notoriously closed VMware still dominates the hypervisor market, critics deride Cisco’s much-ballyhooed UCS efforts as lock-in-inducing, and Oracle’s pending purchase of Sun Microsystems has some worried about the fate of Sun’s renowned open-source projects — including MySQL.

Interoperability tried to gain a foothold in the world of cloud computing, too, but the Open Cloud Manifesto was laughed out of the room, and open API initiatives have yet to make any real progress. Amazon, Microsoft and Google still are considered cloud frontrunners, and VMware’s vCloud API is making its way into dozens of offerings, restricting VMware customers to these clouds if they want to experience the full hybrid capabilities of vCloud.

Although not for lack of trying, infrastructural openness has yet to catch on. — Derrick Harris

Oracle

oracle_logoSpeculation was rampant when the news broke that Oracle was buying Sun Microsystems for $7.4 billion, but there was little doubt that Oracle had just pulled off an IT coup. Among the key pieces of Sun’s intellectual property is MySQL, which would give Oracle entry into the small- to midrange database market currently dominated by Microsoft’s SQL Server.

Then the European Commission stepped in. Citing concerns over how the notoriously closed Oracle will handle the open-source MySQL, the EC launched a full antitrust investigation into the deal, which remains in limbo to this day. Sun’s sales are plummeting as a result, and the company is hemorrhaging an estimated $100 million a month. Worse yet, the initially defiant Oracle has been broken down and humbled, allegedly conceding that it might need to divest or spin off MySQL in order to obtain EC clearance and salvage the deal of the decade. — Derrick Harris

The Server Market

Woe to you if a good deal of your business depends on selling servers. Servers sales hit 12-year lows earlier this year, according to market researchers at IDC, and companies such as Dell have continued to take hits from the decline. Even with the economy showing some signs of hope, server sales are lagging compared with 2008. Even worse, it’s becoming clear that the poor sales are not just due to the gloomy economy, and that current trends may have permanent negative repercussions on the server market.

Above all, the trends toward virtualization and cloud computing look ready to threaten the health of the server market for years to come. By migrating data and applications to the cloud, businesses can buy fewer expensive servers, which eats into the healthy profit margins that computer manufacturers have traditionally gotten from them. Pockets of the server market are showing some signs of life — such as blades — but overall, in 2010 we foresee more bleak times on the server front. — Sebastian Rupley

Chip Startups

After the economy faltered in the fall of 2008, it was a terrible time to be a venture-backed systems or chip startup. Venture firms looked at the cost of supporting these high-cost startups and walked away. Firms ranging from SiCortex to MetaRAM were forced into bankruptcy,  restructured or simply shut down. Other startups that were deep-sixed included Sequoia Communications, an RF chip design firm that was shut down in August.

Also closed in August was Novafora, the company that bought the remains of troubled x86 vendor Transmeta. On the systems side, Verari, a maker of blade-based storage and computer systems, is in the middle of a restructuring, while other heavily backed companies such as ConSentry, a networking switch maker that raised $81 million, were shut down. It doesn’t appear the venture investors are coming back, either. A recent round of predictions from the VC industry for 2010, showed that 64 percent of venture partners expected investments in semiconductors to continue to decline, with a mere 5 expecting to make chip investments. — Stacey Higginbotham

That’s our list. Who do you think we missed?

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