HPE And Rackspace Launch Pay-As-You-Go OpenStack Private Cloud

By Patrick Moorhead - November 17, 2017
Rackspace and HPE If it’s not evident right now, enterprises are in a multi-cloud world, and all future enterprise, if they aren’t there already, will span private cloud and multiple public clouds. Some apps will be on-prem with Microsoft Azure, VMware, RedHat OpenStack/ OpenShift, or IBM Private Cloud and other apps will be in Microsoft Azure, Amazon.com AWS, Google Cloud, IBM Public Cloud Oracle Cloud, or a niche player. For the next ten years, the enterprise will be moving legacy apps to the cloud and building most of their new apps for the cloud. The determinants of which cloud it will go to will be a multivariate assessment of cost, control, simplicity, security, performance, and flexibility. Much of the early move to the public cloud was driven by the pay-as-you-go model where enterprises only paid for what they were using. All developers needed was a credit card and they were on their way to building, testing and hosting an app. This week, Hewlett Packard Enterprise (HPE) and RackSpace announced OpenStack Private Cloud with pay per use, which the companies are talking about as a pivotal moment in the private cloud market. This sounds like marketing speak, but the reality is, is that this is where the industry is moving. An industry first Delivered as a managed service, OpenStack Private Cloud with pay per use will adopt many of the benefits of the public cloud (cloud-like utility pricing, elastic infrastructure, and simplified IT) inside either a private datacenter environment, a colocation facility, or a datacenter managed by Rackspace. The companies say that by allowing customers to pay only for what they use, private cloud will now be 40% less expensive than the leading public cloud—impressive savings to say the least. I haven’t seen the cost model, but as we have conducted comparisons, it passes my “smell test” for a best-case scenario. The cost savings will vary widely by deployment size. Savings like this are a big reason why some analysts are saying on-prem pay-as-you-go models are expected to account for 50% of on-prem and off-prem datacenter spending by 2018. I feel this is a bit high, but the number is between 35-40%. This new offering may be an industry first, but it won’t be the last. For that matter, in the coming years, Hewlett Packard Enterprise and Rackspace are planning on extending this model to the rest of Rackspace’s managed private cloud portfolio. I think we’re going to be seeing more and more of this throughout the industry.
The best of both worlds?
Hewlett Packard Enterprise and Rackspace say this offering will truly be the best of both private and public cloud worlds. In principle, this is accurate from an industry point of view. This, of course, includes the pay-as-you-go aspect, which leverages HPE’s Flexible Capacity on-demand consumption model for infrastructure. As mentioned before, this model likely saves money—allocating resources when/where they are needed, to handle traffic spikes and burst capacity. It’s simply designed to be a cheaper, more efficient, smarter way of doing things than the traditional fixed, on-prem approach, or just throwing everything into the public cloud. As far as performance goes, the two companies say that the offering will keep all the performance benefits of a private cloud, with the public cloud-like scalability. OpenStack Private Cloud with pay per use also offers what the companies are calling enterprise-grade security and compliance through a single-tenant model. This does eliminate a lot of the performance drawbacks and “noisy neighbor” issues that come part and parcel with multi-tenant environments. As I mentioned earlier, OpenStack Private Cloud is consumed as a managed service—with a 99.99% API uptime guarantee from Rackspace. I am excited about this as this is coming from easily the most experienced and established OpenStack operator out there. Wrapping up All in all, I’m feeling cautiously optimistic about this offering from Hewlett Packard Enterprise and Rackspace. I want to buffer my enthusiasm a bit until I start to see big customer traction and revenue. I don't think it's completely fair to look back at HPE's past forays into OpenStack as we are many years later and this deal is with Rackspace, one of the companies who invented OpenStack and is successfully running on-prem and in the public cloud. The impressive 40% cost differential between OpenStack Private Cloud with pay per use and the "leading public cloud" ( Amazon.com AWS )is going to look very tempting to potential customers, but the devil is always in the details. I'll let you know if I get my hands on the details. If this new offering delivers on its promise of being the best of both public and private worlds, I think Hewlett Packard Enterprise and Rackspace could have a winner on their hands.
Patrick Moorhead
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Patrick founded the firm based on his real-world world technology experiences with the understanding of what he wasn’t getting from analysts and consultants. Ten years later, Patrick is ranked #1 among technology industry analysts in terms of “power” (ARInsights)  in “press citations” (Apollo Research). Moorhead is a contributor at Forbes and frequently appears on CNBC. He is a broad-based analyst covering a wide variety of topics including the cloud, enterprise SaaS, collaboration, client computing, and semiconductors. He has 30 years of experience including 15 years of executive experience at high tech companies (NCR, AT&T, Compaq, now HP, and AMD) leading strategy, product management, product marketing, and corporate marketing, including three industry board appointments.