Parallels stakes out tricky spot in the cloud

Aims to dominate an unusual spot: the software that web hosting companies use to provide services in the cloud

Parallels, known widely for its Parallels Desktop software that lets Mac users run Windows in a virtual machine, faces a problem that currently plagues many cloud companies: an identity crisis.

At its annual summit for partners, held in Miami this week, Parallels execs presented a clear vision of what they want to be known for in the cloud market. Parallels aims to dominate an unusual spot: the software that web hosting companies use to provide services in the cloud -- such as web hosting, e-mail, collaboration software and other productivity apps -- to small business customers.

In other words, companies like Go Daddy use Parallels software to deliver services via the cloud to their customers -- without the customers ever thinking about the word "cloud" much.

Parallels has many of the necessary technology pieces, from its Virtuozzo Containers software that efficiently packs many virtual machines onto one server for the hosting company, to virtualization automation tools, plus Small Business Panel software that lets small business customers do IT provisioning tasks themselves via wizards.

If Parallels gets its way, it will be a dominant but mostly invisible software backbone for the small businesses that continue to warm to the idea of SaaS and hosted IT services. Whether it can reach that goal remains to be seen -- because Parallels customers have competition not only from each other but also from giants, including Google.

Battle of the Titans

Parallels customers on the cloud services side range from small and medium-sized hosting companies to well-known players like Go Daddy. Many of these web hosting companies now need to sell a wider menu of services to their customers, and the Parallels software is designed to help them do it quickly and efficiently.

For instance, at the summit this week, Go Daddy announced it would begin offering Cloud Server powered by Mac OS X, an "office in a box" solution including mail, hosting, file sharing, chat and related features to its customers who want to use Macs. It's all backed up by the Parallels technology, specifically, the new Parallels Server for Mac Bare Metal Edition, announced this week.

One big question is this: Will small businesses buy products, such as collaboration software delivered via the Web, from the likes of giants including Microsoft and Google, or from hosting companies?

If Go Daddy's experience is indicative, these customers are open to new vendor choices. People in the tech industry may not think of Salesforce.com and Go Daddy in the same breath, but Go Daddy, with 7.5 million customers, is quietly becoming quite a SaaS player. Go Daddy President and Chief Operating Officer Warren Adelman, a keynote speaker at the Parallels event, showed Goldman Sachs survey data listing Go Daddy as the no. 7 provider of SaaS software. "We've been in the cloud since before the word was fashionable," he told the crowd.

"How do you compete with behemoths spending billions on infrastructure?" Adelman asked the Parallels summit attendees. Go Daddy's answers for its customers include ease of use, stability, predictability and security, Adelman says. "This market is big enough that it can support many players," he adds. It's up to Go Daddy and its competitors to make their services the simplest to use and the least worrisome for users.

The stakes are big: IDC predicts that the cloud services market will hit US$44.2 billion by 2013.

But today, the popularity of cloud and SaaS has created what IDC Research Director Melanie Posey called "chaotic cloudiness." It's hard to sort out which vendors do what, and existing companies face disruptors such as Amazon and Google who are more than capable of offering hosted apps to small business customers.

Next-generation cloud services providers will aggregate, integrate and distribute IT to small business, Posey says. She likens a small business sending IT tasks off to the cloud to someone sending clothes to a laundry service. "They don't want to deal with fixing the washer and dryer," Posey says. "They just want the clean clothes at the end of the process."

Parallels estimates that some 74 million small businesses worldwide are ripe for the picking when it comes to offloading IT services to the cloud. It wants to help its customers provide not just websites but apps, e-mail and storage to small business customers. "Cloud enables small business to get full-fledged access to IT services," Parallels CEO Serguei Beloussov told the crowd at the summit this week.

Parallels Split Personality Problem

Parallels has the software to make its vision happen, but whether it can articulate its message in a chaotic market is unclear. Many hosting companies are scrambling to reinvent themselves. As one attendee of the Parallels summit described it this week, "This is kind of like the Star Wars bar. Everyone is out for something different."

Trying to illustrate the cloud market to the Parallels summit audience, IDC's Posey placed Parallels in the same competitive group with VMware and Microsoft.

But in an interview with CIO.com, Beloussov says he doesn't see it that way. "In general, we are not a virtualization company," he says. "We make service delivery software."

Still, he acknowledges that many people don't know where to place Parallels when they draw a picture of the cloud competitive landscape. "It's a bit of a problem for Parallels," Beloussov says. "Hopefully as we get bigger we will get people to understand we are not VMware.

His closest competitors, he says, are the in-house development teams at hosting companies. But shouldn't he worry that Amazon, Google or VMware could soon decide to make the same enabling software that his company does and eat his lunch?

"I believe they will not be doing it for a while," says Beloussov. "They have a large pie to split among the enterprises. What we are doing is IP [intellectual property] intensive. For them to replicate it would take many years. I'm not so worried about those guys at this point."

Beloussov has recently hired execs from VMware and Amazon Web Services, in his quest to cement Parallels' place in the cloud services market. These hires include CTO Matt Domo, who helped build Amazon Web Services, and VP Amir Sharif, who formerly led product management of ESX server at VMware.

The company's next big technology project, dubbed Cloud Computing Utility, is an Internet-as-a-Service product that will let hosting and cloud service provider companies offer compute and storage power on demand to their customers. CTO Domo, heading up that project, declines to share the timing yet.

But for now, Parallels must manage being a company with two faces -- and the one that is most famous is not the one that the future depends on. Roughly 50 percent of Parallels revenue today comes from the virtualization product side of the house, 20 percent from automation tools, and 30 percent from the Panels products, Beloussov estimates. Clearly, the company is staking its future on the tools for cloud services providers -- but do a Google search on Parallels today and what you'll find is articles on its virtualization software for Macs.

"It's making our life difficult," Beloussov says, "but that is a fact."

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