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This Startup Is Betting Big on ARM Chips Shaking Up the Cloud Equation

A little-known startup is making a big bet that it can parlay new ARM chips, and backing from a Japanese investment giant, to make its presence felt among the cloud computing giants.

The company, Packet, on Tuesday is launching new rentable “bare metal” computing services based on the ARM v8 chip architecture from its data centers in New Jersey, Northern California, Amsterdam, and Tokyo. Customers can set up and launch these resources within minutes, Packet said

The move is unusual because ARM chips are not commonly found in the servers that power corporate data centers or public cloud computer services, such as those sold by Amazon (AMZN) Web Services. They do, however, dominate the smartphone market—scratch an Apple (AAPL) iPhone (God forbid) and you’ll see an ARM chip. And many techies see ARM’s energy-efficient design as an interesting option for servers going forward.

Bare metal servers, unlike typical cloud-based servers, are not virtualized. That means they can run certain jobs, like databases, faster than virtualized cloud servers. IBM (IBM), Rackspace (RAX) and some other cloud companies already offer bare metal options for rent.

New York-based Packet, which disclosed $9.4 million in funding from Softbank in September, aims to satisfy what it sees as a growing market for bare-metal computing on demand. Softbank is a great ally for Packet, since it is buying ARM Holdings for $32 billion. ARM Holdings is the U.K. company that controls and licenses ARM processor designs to manufacturers.

Packet CEO Zachary Smith acknowledges that this is a David and Goliath tale in many ways. Intel chips dominate cloud computing services and equipment, as they do inside corporate data centers. And Amazon Web Services and Microsoft (MSFT) Azure are the behemoths in the public cloud market; both organizations sell (or rent) massive amounts of computing power to customers from their Intel-dominated data centers.

Smith has no problem stipulating that Intel owns “99 point whatever percent” of the data center chip architecture, with a smattering of IBM-backed Power chips and Oracle (ORCL) SPARC chips here and there. Likewise, he admits that Intel (INTC) x86 chips work with everything, that Intel fields a huge partner ecosystem of software, hardware and add-on providers, and that it also owns the biggest-and-best fabrication facilities.

But, he also insists that big changes over the past year are shifting the balance of power. “There are a billion smartphones out there with ARM chips,” Smith noted. As a result, there many manufacturers and plenty of ARM licensees working with the technology. What that means is ARM now has an ecosystem all its own, which is something Softbank and Packet hope to capitalize on.

Taking on established cloud giants like Amazon Web Services is a long shot but there are some critical nuances to consider.

First, the market for rentable computer resources is growing fast enough now to float many boats, including newcomers, provided they have funding and innovative services that corporate developers and their IT strategy overlords want.

Second, even cloud giants admit that new chip technologies will be critical as cloud computing matures. Energy-efficient ARM chips that already power an estimated 95% of smartphones are bound to get a look, especially if their use can reduce data center power requirements. Microsoft and Google also talk up x86 alternative chips for some uses. And Amazon last year bought Annapurna Labs, an ARM chip licensee. Clearly, there is interest here.

Smith contended that the widespread use of ARM chips in other scenarios is also making it easier for cloud service providers (and others) to get early previews of the technology and to develop offerings using it.

For more on Softbank and ARM watch

“In the past, there was a lack of access. If you wanted to work with ARM chips you had to sign a nondisclosure agreement and wait three to five months. It was painful. That has changed,” Smith noted.

The new Packet servers run two 48-core Cavium (CAVM) ThunderX processors and cost a competitive $0.50 cents an hour or $0.005 cents per core per hour.

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Perhaps as important as price, Smith said software developers can keep using their development and deployment tools of choice to run workloads on these Packet servers.

Whether you believe him or not is not really the issue. As of Tuesday, you can try it judge for yourself.