To Build Cloud-Services, Some Companies Adopt OpenStack

The changes in computing are coming from open source, much the same way as there was the move from mainframe to client server. Aivars Lode avantce

To Build Cloud-Services, Some Companies Adopt OpenStackProgram Becomes a Key Factor as Firms Weigh Whether to Keep Computing Operations In-House
April 15, 2014 7:23 p.m. ET By Spencer Ante and Michael Hickins

PayPal chief technology officer James Barrese has seen the future of the company's computing infrastructure and at its heart is a new kind of software.

OpenStack, a sort of operating system for computer rooms, helps eBay Inc. 's PayPal unit to manage about 20% of its computing operations now, including main applications such as its payment and merchant technology. Though Mr. Barrese says the software still needs further refinement, he predicts it will ultimately handle 80% of PayPal's computing functions.

"We are jumping into the deep end," he said.

OpenStack, an open-source program, has become a key factor as companies consider whether to keep computing operations in-house or turn them over to external services known as public clouds run by Amazon.com Inc. and others. Supporters of the software say it can bring the ease of use and agility offered by cloud-service vendors, while using a company's own server systems.

If OpenStack continues to catch on, it could pose a threat to programs that companies now use to run their data centers from vendors like VMware Inc., Microsoft Corp.  and Citrix Systems Inc.  Tech research firm IDC estimates software from such providers used to build cloud services for internal consumption will generate $5.8 billion in revenue this year.

OpenStack is the latest example of big changes brought on by open-source software, the development model behind Linux, the popular operating system used on servers that run most big Web services.

Such programs, whose computer code can be viewed and modified by users, typically come in both commercial and free versions. The latter are a benefit for companies with many servers, which would otherwise pay a software licensing fee for each machine. Such programs also typically have multiple distributors, easing customer fears of being locked into using one vendor.

WSJD is the Journal's home for tech news, analysis and product reviews.

OpenStack was introduced jointly by the National Aeronautics and Space Administration and Web-hosting providerRackspace Hosting Inc. three years ago. The software provides a kind of dashboard to manage large numbers of servers, storage and networking devices as if they were a single resource. OpenStack can help set up computing resources for users at a company in minutes; such processes can take days or weeks if done manually.

Cloud vendors like Amazon, Microsoft Corp. and Google Inc.  have developed similar software to run their own services. But other companies have rallied around OpenStack in an attempt to create an open standard for cloud computing; a group called the OpenStack Foundation has attracted vendors that includeInternational Business Machines Corp.  , Hewlett-Packard Co. , Intel Corp.  , Cisco Systems and Dell Inc.

On Thursday, the foundation plans to release a new version of OpenStack, dubbed Icehouse.

Companies distributing commercial versions of OpenStack include Red Hat Inc. and startups Mirantis Inc., Piston Cloud Computing Inc., Cloudscaling and Nebula Inc.

Ericsson  plans to use OpenStack as the software foundation for its internal operations and to manage cloud services it intends to offer its customers. The telecom giant recently committed to buying a commercial version of OpenStack software from Mirantis. The five-year deal is valued at $30 million, said a person familiar with the deal terms, and is believed to be the largest to date for OpenStack.

Companies such as AT&T Inc.,  Gap Inc.  and PayPal are using OpenStack for what the industry calls "private clouds"—internal computer operations that share many attributes of public cloud services, such as the ability to rapidly add or subtract computing resources.

Rivals offering public clouds and some customers say OpenStack needs more development. Andrew Jassy, senior vice president of Web Services at Amazon, said at a recent conference that there is broad difference in functionality now between OpenStack and top public cloud players like Amazon. "It remains to be seen how much impact it's going to have," he said.

VMware, the Silicon Valley software company majority-owned by EMC Corp., is a key incumbent in software for managing computing resources. When OpenStack was adopted at Ericsson, "most of what it replaced was VMware," said Jason Hoffman, the Swedish company's head of cloud system and platforms.

But John Gilmartin, a VMware vice president, said OpenStack has created opportunities for VMware to help its customers to build hybrid clouds.

Some OpenStack supporters like PayPal's Mr. Barrese say for large companies, a hybrid cloud that uses OpenStack can be around 30% cheaper than using a pure public cloud, while allowing companies to better protect their own data. While initially more expensive, engineers say a private cloud can be cheaper over time because companies can build more efficient systems that are optimized for their needs and use commodity hardware and open-source software.

A Price War Erupts in Cloud Services

Where in enterprise computing does this occur? Price War erupts in Cloud Services Enterprises and will be forced to look at this new model. Aivars Lode avantce

A Price War Erupts in Cloud Services
As Amazon, Microsoft and Google Battle, Users Reap Benefits


By Shira Ovide April 15, 2014 7:43 p.m. ET

Amazon.com Inc., AMZN +0.11% Microsoft Corp. MSFT +1.60% and Google Inc.GOOGL +0.15% are warring over the future of corporate computing, and executives like Michael Simonsen are reaping the benefits.

Mr. Simonsen, chief executive of real-estate startup Altos Research, rents computing horsepower and data storage from Amazon to crunch data on about 100 million U.S. home listings. Three weeks ago, Amazon cut Altos's bill nearly in half. That enabled Mr. Simonsen to add two programmers to develop new services.

"Nobody ever gives you a 40% price break overnight," Mr. Simonsen says. "Our direct benefit is the opportunity to create more products, faster."

Amazon's eight-year-old business, called Amazon Web Services, pioneered the notion of leasing computing power, sparing companies the costs of building their own computing backbone. So far, it has primarily appealed to small firms like Altos.

Microsoft and Google recently bolstered their own offerings, sparking a three-way price war. Within days last month, each company cut prices on various servicesby up to 85%.

That is changing the math for corporate executives who spend roughly $140 billion a year to buy computers, Internet cables, software and other gear for corporate-technology nerve centers.

The tussle will determine how companies orchestrate the computing that runs their businesses, and it threatens the makers of traditional computing-center equipmentsuch as International Business Machines Corp.  , Hewlett-Packard Co. and EMC Corp. A spokesman said IBM offers both outsourced computing services and "higher-margin software." H-P executive Bill Hilf said it is focused on helping organizations modernize their computing backbones to own, rent or a mix. EMC president Jeremy Burton said its sales are growing quickly to providers of Web-friendly computing.

The price war is already delaying the day of reckoning for companies that thought they would one day own their own computing centers.

Marketing-technology firm Krux Inc. has used Amazon's computers to personalize information or ads on customers' websites since it started four years ago. These days CEO Tom Chavez says the company sifts through 160,000 pieces of data a second. He figured Krux would need its own corporate-computing hubs once 750 million Web surfers encountered its technology each month. But it's now at more than double that level, and Mr. Chavez says he isn't planning a move anytime soon.

"These latest price wars among the big guys are sure to postpone it even further, which is terrific for my business," Mr. Chavez says. He is also looking at Microsoft's computing-rental offering, called Azure. Mr. Chavez estimates Krux would spend five or six times as much on people and equipment to operate its own computing infrastructure.

In all, researcher Gartner Inc. estimates companies will spend $13.3 billion this year on pay-as-you-go computing horsepower from Amazon and others, up 45% from a year ago. That's still less than 10% of the total spending on corporate computing centers.

Amazon is by far the biggest player, with revenue last year of more than $3 billion, up 85% from a year earlier, according to Bernstein Research, which calculates its figures differently than Gartner. Bernstein estimates that Microsoft and Google each pulled in several hundred million dollars from their offerings. None of the companies discloses the actual figure.

Behind the growth are big savings. A medium-sized website with about 50 million page views a month might spend about $1,200 a month to buy two computer servers, hardware to push data to the Web and other gear, according to calculations by Simon Margolis at technology-consulting firm SADA Systems. The same company might pay roughly $270 to $530 to rent equivalent computing power from Amazon, Microsoft or Google, he says.

Consultants say such savings are tempting some bigger companies to rent, rather than own, more of their computing power. Already, about 87% of technology executives say they use an outsourced computing provider for at least one task, according to a recent survey by consultant RightScale Inc. But it's rare for a large company—Netflix Inc. is the most cited example—to operate primarily this way.

Matt Gerber, an executive vice president of 2nd Watch Inc., which helps big companies use Amazon's rental offering, says a large consumer-products firm that has been renting Amazon computing power for minor needs, such as marketing websites, is preparing to move more core-computing functions to Amazon from its own network. He declines to name the company.

"The cost models [clients have] done have all gone out the window" because of the price cuts, says Sebastian Stadil, founder of Scalr Inc., which helps companies manage their computing backbone. Mr. Stadil says an Internet firm that his company works with is considering moving some workloads to Google's Compute Engine because of the recent price cuts and a new policy that applies discounts without requiring a service contract.

There are obstacles to the rental model that may limit growth. It's often cheaper and more reliable for large companies, especially those with predictable computing needs, to own or control their own computing backbone. Companies also often have to rework many of their older software programs to run on another company's computers.

In highly regulated industries such as health care, companies often want to keep sensitive digital information on their own computers. Recent revelations about U.S. government surveillance programs have also made customers of outsourced computing providers ask tougher questions about the data's security, according to technology vendors and customers.

Some companies, including Comcast Corp., try to blend the approaches, applying Amazon's techniques on their own computing centers. Forrester Research says that about a third of the big companies it surveyed last year had created an Amazon style of pay-per-use technology on computing hubs they owned.

In the rental business, the heightened competition is prompting some customers to switch vendors. CliQr Technologies, which helps companies calculate the costs of their computing needs, says more customers in the last year have jumped from one outsourcing provider to another, particularly after Google revamped its offerings.

Thermopylae Sciences & Technology, an Arlington, Va., digital-mapping company, has been renting computing power from Amazon and was eager to try Google, but the service wasn't quite ready, says Michael Cachine Sr., chief information officer.

Since Google changed its offerings, however, Thermopylae has used Google's service to build software that handles employee-performance reviews and lets workers enter their personal information for colleagues to see. "As soon as the gate opened, we started building," Mr. Cachine says.

Which Channels Do Marketers Find Best for Generating and Converting Leads?

Which channels do marketers find best for generating and converting leads? Aivars Lode avantce

Which Channels Do Marketers Find Best for Generating and Converting Leads?

May 20, 2014 by MarketingCharts staff

Which marketing channels have the highest potential to convert leads into sales? Offline methods still do the trick, according to Ifbyphone’s “2014 Marketing Measurement Survey Report” [download page]. Asked to choose which of 9 channels presents the best bet for sales revenue conversion, a plurality 35% of marketers cited in-person visits, with inbound phone calls (20%) next. Those two channels also garnered the highest overall ratings for their ability to generate high-value revenue.
While the share of marketers indicating in-person visits to be their most valuable declined from last year, the overall ratings ascribed to this method for its potential to bring in high-value revenue actually increased. This year, in-person visits received an average rating of 7 (on a 9-point scale) for its propensity to garner high-value leads, up from 6.5 last year.

Beyond offline methods, PPC clicks/website visits and email inquiries were tied, with 11% of marketers tabbing each as their most valuable channel for lead conversion. But email inquiries scored a higher average rating (6.3) than PPC clicks/website visits (5.4) for their ability to generate high-value revenue.

Compared to last year’s survey, marketers this year seemed less enthused by webinar attendance and instant messaging. Those channels were at the bottom of the list in terms of lead conversion ability and ability to generate high-value revenue – and both were down from last year on each measure.

Interestingly, while offline methods are seen best for converting leads into sales, respondents to the study find online channels to be tops for sourcing high-value leads. Email led all channels for sourcing leads (57% preferring), followed by SEO and PPC (55%) and social media (44%). Each of those channels saw an increase in share of respondents from last year.

By contrast, the next-most preferred lead generation channels, conferences, tradeshows and events (39%) and direct mail (26%) were relatively flat from last year. Fewer respondents this year (23%) see PR as a preferred channel for generating high-value leads. And while slightly more recognized print ads (16%) and TV (9%) as valuable, those channels are still solidly in the minority. (It’s also worth noting that these results may correlate with actual usage, as marketers are likely much more apt to be using email marketing and social media than to be buying print or TV ads.)

In other results from the survey, three-quarters of respondents indicated that their CEO is either totally (38%) or significantly (37%) committed to marketing, up from 67% responding that way last year. Respondents are also providing marketing measurements to their CEOs and leadership more frequently this year: 6 in 10 do so daily (8%), weekly (25%) or monthly (27%), up from 55% doing so at that frequency last year. Across 12 metrics, 10 are being used by a greater share of respondents this year, with the top metrics – increase in sales/revenue – seeing a big uptick in use from 49% last year to 69% this year.

Despite an increase from last year, only a minority 45% are measuring marketing ROI. Respondents indicated that they need more attention to the measurement process (42%) and more budget (39%) in order to be more successful in measuring marketing ROI this year.

About the Data: The survey garnered 551 respondents. More than 1 in 5 are president/owner of their organization, and another 35% hold a marketing management position. A majority 57% of respondents come from organizations with less than $5 million in revenue. Agencies, technology firms and consulting organizations represent just over half the respondent community, with healthcare and financial groups making the top five sectors.

Microsoft's 'evil open source' man on life as HP's top cloud-wrangler

Hp basically supporting open source at the expense of their own proprietary stuff. Aivars Lode avantce

Microsoft's 'evil open source' man on life as HP's top cloud-wrangler

By | Gavin Clarke 25th April 2014 07:28

Sweating the assets and building up OpenStack

He brought Microsoft the open source it had viewed with such dread and now former Redmond man Bill Hilf is challenging the thinking at Hewlett-Packard.

Microsoft plucked Hilf from IBM in 2004 to become its general manager for open source and platform strategy at a time when Microsoft was waging a war on open source, calling it a “cancer”.

IBM, meanwhile, was so enthralled with the stuff it was spray-painting peace signs, hearts and Tuxes on city pavements in San Francisco and Chicago in an “IBM loves Linux guerilla" ad campaign.

“When I first started at Microsoft, open source was truly considered a societal evil,” Hilf reflected on those early days for The Reg.

Since Hilf's time there, Microsoft now participates in open-source projects, has improved the way open-source code runs on Windows and has even developed software that manages Linux servers.

After ascending to general manager of Windows Azure product management, Hilf left Microsoft in June 2013 to become HP's vice president of converged cloud products and services. He now oversees the HP enterprise group's portfolio of products being built and/or integrated for HP’s private, public and managed cloud.

Open wide... but not THAT wide

Things are different at HP: the computer and server maker has been involved in the open-source and Linux movement for a long time – both have helped it shift servers. Before that, HP was an early mover in open systems by backing Unix.

Hilf is preaching to the converted at HP but admits to challenges building a cloud that’s open – founded on OpenStack – but whose bricks are HP’s not inconsiderable non-open-source assets.

“I very rarely have conversations internally with somebody doesn't understand the dynamics of working with the [open source] community,” Hilf told The Regin a recent interview.

“But there’s still a proprietary business inside HP, so there are still times when we are building open source that groups [within HP] say: 'Why do we need to do that?'."

An HP cloud group was formed to help people understand the new technologies. The units is based not near corporate HQ in Silicon Valley but in Seattle, centre of ops for cloud services giant Amazon and, er, Microsoft.

HP might be pro open source but it remains a PC, server and printer OEM – albeit struggling to pull itself up by its commodity box-pusher roots and plant itself into services under chief executive Meg Whitman.

Engaging with the community is important in terms of making its cloud successful rather than just a vehicle to flog more servers.

Building a 'hardened' OpenStack infrastructure

That means committing paid HP programmers to work on the open-source OpenStack code, code that might also help other companies – including potential rivals.

Hilf claims he’s hiring a “ton” of people in dev and testing to deliver and OpenStack product HP can credibly claim it's able to support. The firm is now thethird largest single contributor to OpenStack – behind Rackspace and Red Hat – with “others” the largest block.

Hilf promised HP would “invest a lot” in things like stability, QA and hardening of the OpenStack code to build an infrastructure that’s “enterprise ready.”

How committed is HP to OpenStack? Very.

Hilf quotes the example of how HP last year killed its own proprietary UI for OpenStack and backedHorizon, the OpenStack dashboard, instead.

It was a step backwards in functionality until HP invested time in improving Horizon, but Hilf reckons it was worth it.

“Now we are at parity with where we were before and we are in the trunk of the open source project - that’s what we are doing all over the place,” he said.

But Hilf is plugging a skills gap inside HP and the industry as a whole. Three years in, OpenStack programmers are in relatively short supply with many of those from the early days having spun out to create well-paid consulting operations.

Investing in people now will pay off for HP in the long term, Hilf believes. He subscribes to the view that OpenStack is doing what Linux did on the desktop and server, but he’s not complacent about the obstacles – technical or political – and, therefore, not sitting back on the naive belief that OpenStack's destiny is simply manifest.

In today's cloud world, OpenStack is looking decidedly outgunned: with Amazon in the lead and Google, Microsoft, IBM, SAP and Oracle racing to catch up.

Each of these companies’ cloud operations have their corporate sponsors behind them, but no one big operation of comparable size or influence is driving OpenStack.

“OpenStack is three years old and it has to go through a lot of growth but it’s not something we at HP are going to wait for until it’s ready. HP has decided we would shape that future to make OpenStack what we and customers need it to be,” Hilf said.

“A lot of guys are trying OpenStack today and saying it’s hard. They sit back and say: ‘Do I have to?’. When I started at Microsoft, the same statements being made today were being said about Linux and MySQL.

Beware the godfathers of SQL

“The godfathers of SQL server would say there’s no way an open-source database can be mature enough for an enterprise, or that the competition is too hard and too advanced,” says the former Redmond man.

What of Hilf’s former employer Microsoft and its cloud gambit Windows Azure – does this feature in HP’s future?

Back in 2010, at least according to Microsoft, the answer was “yes”. Announcing Azure, Microsoft named HP with Dell, Fujitsu and eBay as those firms which would offer cloud services and appliances using the then-new Windows Azure.

Several years on, only Fujitsu has released a true Windows-Azure based cloud. Microsoft is present in HP’s cloud, but only in the form of Windows that runs as a guest on HP’s public cloud – along with Linux. You can pay to use them. The operating system that underpins HP's cloud environment is Ubuntu 12.04 LTS with KVM.

There will be no HP-Azure or Windows HP cloud, but applications on HP’s OpenStack cloud will be able to talk to apps on Microsoft's cloud should the users wish.

“I see interoperability with Windows Azure higher up the stack,” Hilf said. “If a customer has an application running in Windows Azure and wants OpenStack cloud-to-cloud communication, we will allow that interoperability.’

The billion-dollar question: What do enterprise customers want?

The cloud-wrangler reckons if he’s bringing anything from Microsoft, it’s the experience of building a system that’s suited to enterprise customers.

“A lot of what I learned, and our strategy, was formed by spending considerable time in the last five years with enterprise customers – talking to them about cloud in my role on Windows Azure,” Hilf reckons.

What did he pick up? That enterprises like the idea of paying for gigabits-per-second without owning the servers but are constrained by softer issues like putting their legacy online or by regulatory compliance that restricts where their data can go.

What many are doing as a result is taking a hybrid approach, like running mobile apps via a web tier and keeping large chunks of what they run behind the firewall, he says. They also want a "big" vendor that they can call for support, he adds.

Hilf said HP isn’t chasing the Bitcoin or Snapchat user, but rather the enterprise customer that wants a secure and reliable and product environment.

He claimed 1,500 customers on the HP private cloud with a “wide amount of customers for others areas”. These are what he called “classic” customers in more traditional IT shops – large enterprises in the Global 2000.

“These companies are telling us: 'We want a big enterprise behind open source that we can get support and services from'," he says.

The two Michaels

Hilf's position at HP has been to bring the firm’s assets together to create the kind of coherent platform that facilitates this enterprise use.

HP claims part of its increased $811m R&D spend – small by comparison to some of HP’s tech rivals – is because of the investment it’s making in cloud.

“What I spend most time working on is 'How do I build a coherent stack, not just a virtual machine structure, but platform layer, management tools coherent across any deployment environment, in our data centre or their data centre',” the cloud man said.

Recent examples include the HP Cloud System that was built using the firm's 3PAR storage, FlexFabric networking, VirtualSystem and VMware management.

Late in 2013, HP announced big data analytics as a service using software from enterprise search specialist Autonomy and from post-SQL database Vertica – companies acquired from the two Michaels (Lynch and Stonebraker respectively).

Hilf said his goal is to build an HP cloud capable of running the same applications and services anywhere around the world in public and private data centres.

HP wants cloud customers to be running HP database services, messaging, networking and storage, whether they are behind or outside the firewall.

“A lot of work is to bring together the one HP cloud portfolio,” Hilf told us. “The start of the work was getting the execs to understand – and aligning down further in the pipe product plans and roadmaps are going in the same direction.

“You will see us more about productification of the cloud assets – and more and more [companies] turning specifically to the enterprise,” he promised.

Red Hat Plays Hardball on OpenStack Software

Even red hat is worried about open stack. Aivars Lode avantce

Red Hat Plays Hardball on OpenStack Software

Rivals Fear That Software Maker Is Using Linux Dominance to Block Use of Alternative Cloud Software

By Spencer E. Ante Updated May 13, 2014 7:43 p.m. ET

Software maker Red Hat Inc. RHT -1.38% has outrun dozens of companies over the past decade to become the dominant commercial provider of the open-source operating system known as Linux.

Now, Red Hat, which has built a nearly $10 billion company around Linux, is trying to expand by creating a new business in software that runs cloud-computing systems. But some Red Hat rivals, partners and customers fear that it is wielding its dominance in Linux to block organizations from using alternative cloud software.

At the heart of the issue is Red Hat's embrace of OpenStack, a new kind of open-source software that is expected to play a central role in the operation of data centers as companies consider whether to keep computing operations in-house or turn them over to external services known as public clouds run by Amazon.com Inc., AMZN +0.59% Microsoft Corp. MSFT +1.84% , Google Inc.GOOGL +0.58% and others.

Supporters of OpenStack say it can bring the ease of use and agility offered by cloud-service vendors, while using a company's own server systems. Besides Red Hat, Hewlett-Packard Co. HPQ +1.40% , International Business Machines Corp. IBM -0.20% and startups such as Mirantis Inc. are offering or supporting commercial versions of the software. This week, nearly 5,000 technologists and developers from those companies and others are discussing cloud software at the OpenStack Summit, an annual conference in Atlanta this year sponsored by Red Hat.

For Red Hat, OpenStack could help stem slowing revenue growth as the Linux market matures. In the latest fiscal year, Red Hat's revenue growth slowed to 15%, compared with 25% two years ago. About 87% of last year's $1.5 billion in revenue came from selling subscriptions to its Linux distribution.

The revenue from OpenStack is small today but research firm IDC estimates software from such providers used to build cloud services for internal consumption will generate $5.8 billion in revenue this year.

In its quest to sell OpenStack, Red Hat has chosen not to provide support to its commercial Linux customers if they use rival versions of OpenStack, according to documents reviewed by The Wall Street Journal. The company's support, which includes providing bug fixes and helping customers if they run into technical problems, is a key reason people use Red Hat rather than free versions of Linux.

Since Red Hat's Linux is used so widely in corporate computing systems, with a 64% share of the paid Linux market, according to IDC, some organizations say the lack of support can discourage them from using other versions of OpenStack.

One senior engineer of a prominent research institute wanted to use Mirantis OpenStack software because he believed Mirantis had more experience with the technology than Red Hat, but once he heard Red Hat would drop support of its Linux software, "Mirantis was out of the picture," said the person.

Red Hat says it would cost too much to support different versions of OpenStack, and that its cloud software needs to be tied tightly to its Linux distribution.

James Barrese, chief technology officer of eBay Inc.EBAY +0.49% 's PayPal unit, which uses the free version of OpenStack with Red Hat's Linux, says he doesn't think OpenStack necessarily has to be integrated with a specific operating system. "Ultimately for me it will be about who has the best solution," he said.

Even some of Red Hat's largest partners say its actions contradict the spirit of the open-source community. In contrast to proprietary software, open-source programs can be modified by users, and typically interconnect with competing programs.

"Red Hat has taken the art form of closed open-source to a new level," said Martin Fink, H-P's head of its cloud business. H-P sells and supports Red Hat's Linux software, but it also competes with Red Hat in the OpenStack and cloud-software market.

Last November, Red Hat ordered its employees to stop working with Mirantis, a startup that sells a subscription and support for a commercial version of OpenStack. Red Hat partnered with Mirantis and invested in the company last June. It tapped Mirantis consultants and tools to help Red Hat customers build cloud-computing systems using Red Hat's version of OpenStack.

But after Mirantis began selling OpenStack software last October, Red Hat deemed Mirantis a competitor and dissolved the services partnership, according to a confidential Red Hat memo reviewed by The Wall Street Journal.

"Do not work with Mirantis," said the memo to Red Hat employees. "We should not engage them jointly with any customers or leverage their services for delivery of our products."

Red Hat has also been asking some partners that resell its technology to not work with Mirantis, according to remarks on a reseller's voice mail reviewed by the Journal.

In February, one large Red Hat reseller told a Mirantis sales executive that it had received phone calls from Red Hat senior leadership "encouraging us very strongly to not partner" with Mirantis partly due to "some emotional feelings," according to the voice mail. "Right now I am not in a position to jump into this and throw resources at this because of the political climate."

Mirantis CEO Adrian Ionel said Red Hat always knew it had OpenStack software, but it didn't become a problem until Mirantis began marketing it more aggressively. "The customers will not have any of this," he said.

Red Hat President Paul Cormier said the company didn't know Mirantis was going to offer OpenStack and it isn't going to bring a competitor into its customer base. "It is too confusing for our customers," he said.

IDC analyst Al Gillen said Red Hat's behavior is somewhat aggressive but he understands its motivation to keep a lid on its support costs. Eventually, Mr. Gillen said the behavior may come back to haunt Red Hat because there are other Linux alternatives.

"It's not a great position for Red Hat to take," he said.

Forget 'the Cloud'; 'the Fog' Is Tech's Future

The cloud is getting foggy, what does that mean? Aivars lode avantce

Forget 'the Cloud'; 'the Fog' Is Tech's Future

I'm as big a believer in the transformational power of cloud computing as anyone you'll meet. Smartphones, which are constantly seeking and retrieving data, don't make sense without the cloud, and any business that isn't racing to push its data and software into someone else's data center is, in my view, setting itself up for disruption by a competitor who is.

Brian Ajhar

But cloud advocates are fond of declaring that 100% of computing will someday reside in the cloud. And many companies are in business to sell you on that notion.

Here's the reality: Getting data into and out of the cloud is harder than most engineers, or at least their managers, often are willing to admit.

The problem is bandwidth. If you're a company simply seeking to save the cost and headache of storing data yourself, the cloud is great as long as all you need to do is transfer data back and forth via high-speed wiring.

But in the world of mass connectivity—in which people need to get information on an array of mobile devices—bandwidth is pretty slow. Any business that sends data to mobile devices, be it airline reservation systems for consumers or business data for a mobile sales force, grapples with the limitations of wireless networks. Overall, according to the World Economic Forum, the U.S. ranks 35th in the world in terms of bandwidth per user.

That's one reason that mobile apps have become a predominant way to do things on the Internet, at least on smartphones. Some of the data and processing power is handled within your device.

The problem of how to get things done when we're dependent on the cloud is becoming all the more acute as more and more objects become "smart," or able to sense their environments, connect to the Internet, and even receive commands remotely. Everything from jet engines to refrigerators is being pushed onto wireless networks and joining the "Internet of Things."

Modern 3G and 4G cellular networks simply aren't fast enough to transmit data from devices to the cloud at the pace it is generated, and as every mundane object at home and at work gets in on this game, it's only going to get worse.

Luckily there's an obvious solution: Stop focusing on the cloud, and start figuring out how to store and process the torrent of data being generated by the Internet of Things (also known as the industrial Internet) on the things themselves, or on devices that sit between our things and the Internet.

Marketers at Cisco Systems Inc.  have already come up with a name for this phenomenon: fog computing.

I like the term. Yes, it makes you want to do a Liz Lemon eye roll. But like cloud computing before it—also a marketing term for a phenomenon that was already under way—it's a good visual metaphor for what's going on.

Whereas the cloud is "up there" in the sky somewhere, distant and remote and deliberately abstracted, the "fog" is close to the ground, right where things are getting done. It consists not of powerful servers, but weaker and more dispersed computers of the sort that are making their way into appliances, factories, cars, street lights and every other piece of our material culture.

Cisco sells routers, which aside from storage has got to be the least sexy business in tech. To make them more appealing, and to sell them to new markets before Chinese competitors disrupt Cisco's existing revenue streams, Cisco wants to turn its routers into hubs for gathering data and making decisions about what to do with it. In Cisco's vision, its smart routers will never talk to the cloud unless they have to—say, to alert operators to an emergency on a sensor-laden rail car on which one of these routers acts as the nerve center.

International Business Machines Corp. IBM +0.74% has a similar initiative to push computing out "to the edge," an effort to, as IBM executive Paul Brody puts it, turn the traditional, cloud-based Internet "inside out." (When people talk about "edge computing," what they literally mean is the edge of the network, the periphery where the Internet ends and the real world begins. Data centers are in the "center" of the network, personal computers, phones and surveillance cameras are on the edge.

Just as the cloud physically consists of servers harnessed together, in IBM's research project, the fog consists of all the computers that are already around us, tied together. On one level, asking our smart devices to, for example, send software updates to one another, rather than routing them through the cloud, could make the fog a direct rival to the cloud for some functions.

The bottom line is, we just have too much data. And we're just getting started. Airplanes are a great example of this. In a new Boeing Co. 747, almost every part of the plane is connected to the Internet, recording and, in some cases, sending continuous streams of data about its status. General Electric Co. has said that in a single flight, one of its jet engines generates half a terabyte of data.

Cheap sensors generate lots of "big" data, and it's surprisingly useful. So-called predictive analytics lets companies like GE know which part of a jet engine might need maintenance, even before the plane carrying it has landed.

Why else do you think Google Inc. and Facebook Inc. are talking about alternate means of Internet access, including via balloons and drones? Existing carriers aren't getting the job done. Until the U.S. gets the fast wireless and wired Internet it deserves, computing things as close to the user as possible is going to be critical to making the Internet of Things responsive enough to be usable.

The future of much enterprise computing remains in the cloud, but the really transformative computing of the future? It's going to happen right here, in the objects that surround us—in the fog.

H-P Slashes Up to 16,000 More Jobs

IBM: Hewlett-Packard revenue declines as the open systems movement is killing the revenue growth. Aivars Lode avantce

H-P Slashes Up to 16,000 More Jobs

Long-Running Restructuring Is Extended as Tech Giant Struggles to Revive Sales, Be More Efficient

Hewlett-Packard Co.  is cutting thousands more jobs, as efforts to revitalize the company have sputtered amid a rapidly changing technology landscape.

The Silicon Valley giant said Thursday it would cut an additional 11,000 to 16,000 jobs on top of 34,000 positions it previously said would be eliminated as part of a multiyear restructuring plan. At the midpoint of that range, the new cuts would trim an additional 4% from H-P's workforce of about 317,500 employees.

News of the job cuts came as H-P announced results for its fiscal second quarter, revealing a drop in revenue that overshadowed higher profit. The results follow two quarters that had generally pleased investors, as the company appeared to stabilize itself under Chief Executive Meg Whitman after several years of turmoil.

H-P, known largely for personal computers, server systems and printers, has been grappling with stiff competition and big shifts in the technology industry. Challenges across its array of businesses, along with the new job cuts, may complicate efforts to revive growth and innovation.

Ms. Whitman sought to portray the unexpected job cuts as an opportunity to further streamline a company that had grown bloated over the years through multiple acquisitions.

"I'm not at all disappointed, I think it's the natural course of what makes sense in a turnaround of this size and scale," she said. The restructuring, along with continued investments in growth areas such as cloud computing, analytics software and networking technology, would set up the beleaguered Silicon Valley icon "as a force to be reckoned with," she said.

But some analysts wondered if Ms. Whitman was trying to get ahead of potentially weakening demand by announcing the new job cuts.

The quarterly numbers were accidentally posted on H-P's website ahead of schedule and before the close of regular trading Thursday.

H-P shares, which had been trading higher earlier in the session, fell following the disclosure by more than 2% to $31.78 at 4 p.m. The stock slid more in after-hours trading before rebounding slightly.

Chief Executive Meg Whitman said the new layoffs will affect all business units and geographies. Reuters

Following the release of the financial results, H-P announced leadership changes at its software and networking businesses.

Ms. Whitman said the new layoffs will affect all business units and geographies. "We recognize that it is difficult for employees," she said. "Our employees know there are ways we can be more efficient."

In fiscal year 2014, H-P said it expects the new layoffs will produce approximately 2 to 3 cents a share of incremental savings, an estimated incremental charge of approximately $500 million and an additional cash-flow impact of approximately $200 million in the second half of the year.

H-P said layoffs will also create additional savings in fiscal year 2016 of approximately $1 billion a year, although some of this will be reinvested back into its business.

For the quarter ended April 30, H-P reported that net income rose 18% to $1.27 billion, or 66 cents a share, from the year-earlier level of $1.1 billion, or 55 cents. On an adjusted basis excluding certain expenses, H-P put earnings per share at 88 cents. Revenue fell 1% to $27.3 billion. Analysts on average had expected adjusted earnings per share of 88 cents on revenue of $27.4 billion, according to Thomson Reuters.

H-P's strongest-performing segment was its PC group, whose sales rose 7% thanks in part to continuing strength in sales of computers to businesses. PCs are H-P's largest business by revenue, but they also typically produce the lowest profit margin of the company's main business groups.

RBC analyst Amit Daryanani wrote that the mix of the company's revenues is concerning especially if PC sales start to slow down following the boost seen in April when some customers were forced to buy new machines after Microsoft Corp. ended support for its Windows XP operating system.

Performance at H-P's software group improved, as its sales were flat with the year-ago quarter. In the previous quarter, software sales fell 4%. But its large enterprise and printing groups took a step backward, while its technology services group continued to struggle.

While companies such as International Business Machines Corp.  are retreating from a hardware market with low margins and intense pricing pressure, H-P is moving to bolster its computing hardware business.

H-P's enterprise group makes servers, storage and networking equipment and represents about a quarter of its total revenue and roughly 40% of its operating earnings. In the latest quarter, the enterprise group, which had grown slightly for the past two quarters, saw its sales drop 2%.

Revenue in H-P's printing group fell 4%, compared with 2% in the previous quarter.

As part of the executive changes announced Thursday, Executive Vice President George Kadifa, who had served as head of H-P's software operations, was appointed to a new job in charge of strategic relationships. Taking his place will be Robert Youngjohns, who previously led H-P's Autonomy unit, which makes analytics software.

Ms. Whitman said the current head of H-P's server business, Antonio Neri, was also appointed to run its networking business.

For the current quarter, H-P put adjusted earnings per share at 86 to 90 cents.