This morning @ Interop Enterprise Cloud Summit I listened to quick pitches from VMware and Red Hat on their respective PaaS platforms. The clear consensus from both sides is that PaaS is the future cloud operating system. The interesting thing here is both PaaS platforms are “free”. VMware and Red Hat are taking the “freemium” approach. They are giving the core offering away to seed the market, drive adoption to their platforms and then figure out ways to monetize it over time. My understanding is that VMware will sell the underlying vCenter infrastructure to stand up CloudFoundry (if you run it on premise) or will run CloudFoundry.com as a service if you want to run applications on top of it. Either way, the free PaaS layer should drive more underlying VMware infrastructure sales underneath it. This is a no brainer for VMware. I see this as the server hypervisor game all over again. Only this time they aren’t wasting any time charging for PaaS. Instead they are trying to accelerate adoption, and market share leadership, by giving away the cloud hypervisor. In contrast to VMware, Red Hat has been in the free software business since inception. There approach is to apply this same business model to the new platform. They are giving their Open Shift PaaS away for free and selling a support/maintenance contract around it.
While it is too early to debate winners or losers in PaaS, the rapid evolution of the revenue model (or lack thereof) has very interesting implications. This freemium approach, on the surface, would seem to pose a significant challenge for the many vendors out there that are trying to build a business around PaaS. If the PaaS layer is going to be “free” then the business models need to quickly adjust to account for this. Pure play vendors, lacking an adjacent business to monetize PaaS, need to now simultaneously drive adoption and alternative revenue streams. Of course, broad adoption might be enough to make the larger OEMs pay attention. If this happens, consolidation follows and the revenue model won’t matter.
If given the choice, the traditional server OEMs would probably take their time, explore partnerships with various standalone PaaS vendors and make a more informed bet with one. However, in giving away PaaS for free, VMware and Red Hat have heightened the urgency for competitors to respond. By abstracting away the underlying cloud infrastructure, PaaS is an increasingly strategic control point in the cloud discussion. For every vendor that missed out on owning VMware, and the importance of owning that abstraction layer in the data center, I suspect they aren’t going to sit back and watch them take the cloud too.