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Microsoft’s acquisition of cloud technology company Deis, announced this week, illustrates the growing importance of containers for deploying software across a variety of platforms and devices, and could further stoke interest in Kubernetes, the container orchestration technology in which the San Francisco-based company specializes.

That’s the general consensus among investors, competitors and industry analysts polled by GeekWire following Microsoft’s announcement. Deis builds open-source software to make Kubernetes easier to use. The deal underscores the commitment by Microsoft CEO Satya Nadella and Scott Guthrie, the company’s Cloud and Enterprise chief, to ensure that open-source technologies remain a key element of the Redmond tech giant’s cloud strategy.

Midfin Systems CEO Suyash Sinha.

Suyash Sinha, CEO of Redmond-based cloud enterprise infrastructure company Midfin Systems, said he sees the Deis acquisition as a strong competitive statement by Microsoft about how it intends to compete with Amazon Web Services (AWS).

“One of Microsoft’s past mistakes was not embracing open source as boldly,” said Sinha. “In my opinion, this acquisition of Deis is a bold statement by Microsoft that it is willing to go the extra mile to make Azure not just a leading public cloud, but make it a favorite even for non-traditional open source developers.”

Rodney Nelson

But experts are split on whether the Deis acquisition foreshadows increased activity in the areas of mergers and acquisitions, venture capital investment or initial public offerings for startups associated with cloud container platform technologies and tools.

According to Rodney Nelson, an equity analyst at Morningstar Inc., containers are becoming “table stakes” for software development tools because of the complexity of virtualization and application deployment.

“Essentially, a container allows an application developer to bundle all of the necessary aspects of an application (application code, binary files and libraries) such that it can essentially run in any computing environment on top of any operating system.” he said. “However, deploying a container remains a challenge, and that’s where Kubernetes comes in. Essentially, Kubernetes automates the deployment, scaling, and management of a containerized application, which is particularly important in a cloud-based environment where workload demand can fluctuate up and down.”

Sheila Gulati

Microsoft is improving its position by acquiring Deis, a services company that specializes in using Kubernetes to improve deployment and management of containerized apps, he said.

“Kubernetes has become a very popular deployment tool, so this acquisition definitely bolsters the Microsoft Azure offering in what is quickly becoming a feature arms race between the market’s largest players (including Amazon, Microsoft, Google and Alibaba).”

Sheila Gulati, managing director of Seattle-based Tola Capital, agreed that the Deis deal is significant for Microsoft: “Unlike the other public clouds, Microsoft is taking an ecumenical approach to container orchestration,” she said. “They support all the major orchestration options and the Deis acquisition is a doubling down on Azure’s Kubernetes support.”

Microsoft is acquiring Deis from Engine Yard, the San Francisco-based company that picked up Deis as part of its acquisition of OpDemand in 2015. Gulati says the deal raises interesting questions about Engine Yard’s future direction, given the relatively short amount of time between its acquisition of Deis and the sale to Microsoft.

Nat Burgess

M&A specialist Nat Burgess, founder of Seattle-based technology M&A firm TechStrat, also said the deal would be helpful to Microsoft, but he doesn’t see it pointing to a larger trend in mergers and acquisitions.

“Microsoft’s strategy can’t be to buy everyone who gets traction in container tech,” said Burgess. “We may see competitors respond with a deal or two, but the Deis acquisition does not foreshadow a wave of consolidation. However, the investments in SaaS and cloud building blocks, open source and otherwise, will continue to accelerate.”

Startups that specialize in container technology are unlikely to see a lot of quick new investment as a result of the deal, he said. “I think there will be more exploration, but the pace of investment won’t accelerate because of Deis,” added Burgess. “We might see a few deals in response to Deis, but there aren’t many companies that are setting out to own the cloud.”

S. “Soma” Somasegar

S. Somasegar (Soma), managing director of Seattle-based Madrona Venture Group and former head of Microsoft’s Developer Division, was more bullish about the impact of the deal.

“Every major cloud provider (public cloud or private cloud) and enterprise will want to have access to the best set of tools and management capabilities for container environments in their cloud platform,” he said. “Between these and a set of very popular container platforms that are emerging, I see more exit opportunities (whether that’s in the form of an IPO or a M&A) broadly speaking in the cloud infrastructure space.”

Madrona’s recent investments include cloud container technology company Heptio, started by two of the co-creators of Kubernetes at Google, Joe Beda and Craig McLuckie.

Rahul Singh, CEO and founder of Seattle-based cloud infrastructure automation provider Distelli.

Rahul Singh, founder and CEO of Seattle-based cloud infrastructure automation provider Distelli, who also plays in the open source container sector, suggested the move was definitely good for Microsoft, but should also spur further enterprise use of Kubernetes.

“The easier it becomes for companies to use Kubernetes the faster they will adopt it and consequently the faster they will adopt the cloud provider that their clusters run on,” he said. “I believe this move by Microsoft will accelerate the adoption of Kubernetes and consequently Microsoft Azure.”

Sinha, the CEO of Midfin Systems, sees a variety of long-term trends playing out in the container market.

“Venture capital moves 3-5 years ahead of the M&A curve. I think there is already a huge amount of funding in the container startups,” he added. “What this will do is trigger the broader container ecosystem – not just infrastructure with containers but end-to-end solutions in the areas of security, big data and IoT.”

Sinha said he wouldn’t be surprised if there were more acquisitions made by leading players in the sector. “This will trigger a land-grab for sure,” he concluded. “Note that some industry heavyweights have already acquired companies specializing in containers.”

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