The cloud computing market is caught between its head and its heart.
The heart, however, is open.
"Interoperability and vendor lock in are front of mind," is the way Marvin Wheeler, chairman of the Open Data Center Alliance, puts it. Enterprises are at different points in their cloud evolution, but wherever they are, they are pulling budget from standard enterprise computing toward private, public or hybrid clouds.
This is where Red Hat (RHT), which competes with VMWare in the software space and Rackspace (RAX), which is aimed more at Amazon in the public cloud services space, hope to justify their sky-high multiples, currently 66 in the former case and nearly 99 in the latter. Both hope that a dedication to the open source principle will assure their architectures become the glue holding all kinds of cloud together.
For Rackspace this meant sponsoring the NASA-developed architecture now called OpenStack. Red Hat's offering is called OpenShift, and for the last months both have been trying to be seen as more open than thou.
Rackspace responded to the pressure from Red Hat by transferring OpenStack into an independent foundation, while Red Hat has been raising the ante by talking about the need for open standards at every level of the stack, without patent or IP restrictions, along with extensible APIs and portability across clouds.
RedHat has moved its DeltaCloud API to the Apache Foundation, which this week made it a full project, and has won Amazon support for its MRG-Grid, a system for transferring software licenses among clouds. The company has also shored up its relationship with Amazon, the current leader in enterprise public cloud.
IDC research analyst Gary Chen sees a natural progression. Enterprises are testing the technology in private clouds, then moving some functions toward public clouds as key questions of security, privacy and service level agreements (SLAs) are worked through.
Private clouds are an on-ramp to cloud technology, and private clouds in turn are an on-ramp to the use of public clouds through hybrid systems, he concluded.
In all of this, the key question enterprises must ask is, what will be your cloud architecture? That decision, said Scott Crenshaw, vice president and general manager of Red Hat's cloud business unit, will "make or break careers."
Those decisions are being made in 2012 and will define the growth rates of Red Hat, Rackspace, VMWare and many other cloud software vendors. In the choice of the head or the heart, my guess is, the heart will win its share.
Enough to justify those multiples? Maybe, maybe not. But enough to, in time, justify those stock prices.
These are long-term speculations, fully valued by today's market, but in time I expect both will come good. Whether you agree depends on how much time you've got. Five years should do it.
Disclosure: I am long AMZN.