The "cloud computing" revolution has received lots of hype, but for some people, the actual definition of what the cloud is remains a bit hazy. Essentially, utilizing the cloud means that you can access technology resources on-demand, connecting online to large data centers with complex software and server environments. You get your hardware and software resources remotely, on an as-needed basis. The upshot for customers who move into the cloud is a lower investment in technology, integration and support.
Back in 2006, Amazon.com (AMZN) had the foresight to see that cloud computing would be a huge business and launched its EC2 service, giving organizations a way to access the massive computing capacity of the e-commerce giant.
For the most part, EC2 has been a big success, and today, Amazon.com is the No. 1 provider of cloud services. But of course, there are many other players in the sector, among them Google (GOOG) and Microsoft (MSFT).
But life in the cloud isn't without its problems: For example, there are a variety of standards for cloud computing. Not only does this add to the overall costs, but makes it difficult for customers to transition from one vendor to another.
All this is likely to change soon. This week the No. 2 cloud computing services provider, Rackspace Hosting (RAX), announced that it is going to make its software available for free. What's more, Rackspace has joined forces with NASA, which has also agreed to contribute its own code base to the initiative, called OpenStack.
The New Frontier?
When a company or group of coders make their software freely available under an open-source license, anyone can use the technology so long as certain requirements are met. What's more, any contributions users make to the software must be made freely available as well.
As counter-intuitive as giving your software away may sound, the open-source movement has become a powerful force in technology. After all, offerings like MySQL, Apache and Linux are now perfectly viable alternatives to proprietary software for databases, web servers and operating systems. And yes, some companies, such as Red Hat (RHT), have benefited immensely from the open source movement.
However, in the cloud-computing world, open source has not been widespread. Just like any emerging technology, the focus is to try to create something that is proprietary, which makes it difficult to move elsewhere. This often means it is easier to charge customers for premium licenses. Already, there are a variety of proprietary cloud platforms, like Microsoft's (MSFT) Azure and Salesforce.com's (CRM) Force.com.
But if it plans to give its software away for free, how does Rackspace intend to make money? By being at a forefront of an open-source standard, it will be a go-to-company for hosting and services for customers seeking that option. At the same time, it will be quite familiar with the evolution of the technology, which should give Rackspace an additional edge when it comes to attracting new customers.
NASA, on the other hand, is attracted to the lower costs of development of the code base, as well as the ability to tap into continuing innovation from the open-source community. This is especially attractive in light of the budgetary pressures facing the space agency.
Rackspace has already contributed its Cloud Files system to OpenStack. As the name implies, this allows for high-end storage services (which can scale to millions of virtual servers).
By the end of the year, NASA will offer its Nebula software platform, which has a focus on server management. It's the product of two years spent by the space agency developing its own cloud-computing infrastructure so it could avoid being captive to a technology provider. Plus, NASA's involvement will definitely bring much credibility to the project. After all, the agency is highly selective in how it manages its technology.
What's more, NASA has many top engineers. As result, OpenStack is going to have best-of-breed technology. Already, this has attracted over 25 corporate members to the project, among them major players such as Dell (DELL) and Intel (INTC).
While OpenStack is in its early stages, it certainly appears promising: Customers are likely to want open systems and of course, lower costs. And, if the platform gets traction, it should help boost the cloud-computing movement as well as the fortunes of Rackspace, which is already benefiting nicely from growth in the industry.
Small Cap Investing
Learn now to invest in small companies the right way.View Course »