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SUSE goes ranching and lassos a container storage startup

SUSE Storage Enterprise is based on commercially supported Ceph. The Linux distribution vendor reportedly will shell out $600-$700 million for Rancher Labs' Kubernetes technology.

Open source vendors SUSE and Rancher Labs are joining forces, at a time when analysts say enterprise storage containers are poised for mainstream use.

SUSE this week said it agreed to acquire Rancher Labs to combine the companies' hybrid cloud infrastructure technologies. Financial terms were not disclosed, but CNBC reported SUSE will pay between $600 million and $700 million. The companies said the deal is expected to close by October.

The SUSE storage software provides back-end capacity with data management that could serve Rancher's Kubernetes-managed clusters.

"Saying that containers are red-hot right now might be an understatement. This is the future of the data center. It doesn't surprise me that SUSE is making investments to improve its container management capabilities," said Scott Sinclair, a storage analyst at Enterprise Strategy Group, based in Milford, Mass.

Gartner predicts 75% of global organizations will use containers to run production applications by 2023, up from roughly 30% of companies that do so currently.

The proposal signals the latest evolution at SUSE, which private equity firm EQP Group acquired for $2.5 billion from Micro Focus last year. SUSE first launched in 1992. Micro Focus acquired SUSE from Novell, which acquired SUSE for $210 million in 2003.

Based in Germany, SUSE provides one of the earliest Linux distributions. Its software helps companies build software-defined IT services on commodity gear.  The SUSE Enterprise Linux Server operating system is built on the Linux kernel for mainframes, servers and workstations. SUSE Storage Enterprise is a commercially supported version of open source Ceph that supports block, file and object storage.

Founded in 2014, Rancher Labs developed the Enterprise Kubernetes Management platform, which is one of several orchestration tools certified by the Cloud Native Computing Foundation. Rancher is based in Cupertino, Calif., and claims more than 300 corporate customers.

Enhanced SUSE CaaS in the works

IBM acquired one of SUSE's chief rivals, Red Hat, last year for $34 million. Rancher Kubernetes Management engine competes with Red Hat Open Shift and other orchestration tools used to deploy large container farms that need persistent storage.

Sheng LiangSheng Liang

"We have a market-leading product, but we don't have a very wide enterprise-grade distribution. That's what SUSE gives us. SUSE runs a lot of mission-critical workloads and has a footprint that is probably 10 times larger than ours," said Rancher Labs CEO Sheng Liang, who will join SUSE as president of engineering and innovation.

Applications that use Kubernetes orchestration need access to persistent storage. This is done either through the Container Storage Interface to back-end physical storage, or as dedicated software-defined storage that presents itself to users as block devices.

Rancher could use SUSE storage to support containers, although Rancher in June made its Longhorn distributed block storage generally available. Portworx and StorageOS offer competing products to Rancher Longhorn. Also, VMware is in the midst of reconciling its Pivotal Software acquisition, which includes the Kubernetes-based Pivotal Container Service.

SUSE CEO Melissa Di Donato wrote in a blog post that SUSE will integrate Rancher technology in the SUSE containers-as-a-service product. SUSE declined interview requests, citing regulatory approvals.

"With our first acquisition as an independent company, we are paving the way for two leading companies with so many complementary strengths to become even stronger together," Di Donato wrote in the blog.

COVID-19 and containers

The purpose of the deal was not apparent to all industry experts. Greg Schulz, the senior analyst at Server and Storage IO, said he was surprised at the reported price tag for Rancher Labs.

"It's a hit of a head-scratcher. I'm not sure what to make of it. Were Rancher investors looking for a way out? Is SUSE trying to chase the market now that it's independent and [needs to] stay out of IBM's Red Hat shadow?" Schulz said.

More companies are seriously considering containers to speed up digital transformation, especially in light of COVID-19.

"Almost one-third of the companies we interviewed say they plan to use more containers and modern application elements to make their apps more portable across multiple clouds, whether on or off premises," Sinclair said.

Liang said SUSE plans to retain Rancher's 250 employees.

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