Cloud computing allows users to perform computer tasks entirely
over the Internet. Most people have been using the cloud for years
through services such as Google Apps, GoDaddy.com, and
Salesforce.com. A cloud service is typically sold by the minute,
the hour or by the seat (i.e. person) and can provide as much or as
little service as required (significantly reducing the requirements
for acquiring and maintaining IT infrastructure), managed by the
provider. Cloud access can be public (Amazon.com) or private
(proprietary network accessible to a limited number of users).
Working in the cloud provides secure, real time services, allowing
a user to:
Sync your PC and all of your mobile
devices
Access your personal data from any device
Organize and mine data from any online
source
Share contacts, emails, documents in an
instant
What Makes it So Attractive
Gartner reports worldwide cloud computing services is the
fastest growing segment in IT outsourcing which is expected to grow
48.7% to $5 billion in the current year, up from $3.4 billion last
year. Analysts suggest that cloud computing services are currently
only reaching the tip of the iceberg, providing automation of basic
functions. The introduction of ever advancing business applications
to automate operations and monitoring highlights the value
proposition in terms of service consistency, agility and personnel
reduction. The proliferation of corporate mobile devices and
tablets leads to increased demand in secure accessibility to
corporate data. Salesforce.com suggests that demand for cloud
services will expand 20% to 25% annually through 2016, highlighting
the potential attractiveness of this market.
Cloud M&A Activity
The rampant acquisitions in the technology sector can be
attributed to the reduced expense for large technology companies to
simply acquire cloud start-ups relative to the cost to develop the
technology in house. In the last 6 months the average value per
deal (with a disclosed value) was in excess of $200m. Deals were
often driven by large Communication and Information Technology
companies looking to round out their service offerings.
In the last 12 months the market saw a total of 17 transactions
close, 11 in North America, 4 in Asia/Pacific, 1 in both the
European market and the Africa/Middle East market.
The landscape is competitive with the large players such as
Microsoft introducing SkyDrive and Apple's iCloud, creating a
buying frenzy in the cloud based software market.
The list of 2012 Acquisitions alone paints a very clear picture
of the level of activity in the market:
Akamai acquired Cotendo for
$279 million, Apigee acquired
Usergrid for an undisclosed amount,
AMD acquired Seamicro for $331
million; Best Buy acquired
mindSHIFT for $175 million; BMC
acquired Numara for $306 million;
Dell acquired AppAssure &
Wyse, both for undisclosed amounts;
IBM acquired DemandTec for $486
million; Emptoris, GreenHat &
Worklight all for an undisclosed amount;
Oracle acquired Taleo for $1,921
million; SAP acquired
SuccessFactors for $3,764 million;
Virtustream acquired Enomaly for
an undisclosed amount; and Wyse bought
Trellia for an undisclosed amount.
The market has seen acquisitions of cloud companies by other
cloud companies as well as large software companies buying up start
up companies to capitalize on software that links mobile tablets
and Smartphones to remote servers. Some of the larger application
software players have made a move towards PaaS (platform as a
service) applications, which provide a computing platform and a
solution stack as a web based service. Gartner suggests,
"PaaS products are likely to evolve into a major component
of the overall cloud computing market, just as the middleware
products — including application servers, database
management systems (DBMSs), integration middleware and portal
platforms — are the core foundation of the traditional
software industry."
Conclusion
The wave of M&A activity in the cloud won't stop anytime
soon. Traditional hosting businesses continue to acquire much
smaller software companies to upgrade their cloud services. Small
and medium businesses (SMB) are beginning to exchange large data
storage and data centre needs for an entirely outsourced cloud
platform. Smaller cloud services providers continue to present
attractive acquisition opportunities for large IT companies and
larger cloud service providers looking to round out their service
offerings.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
Specific Questions relating to this article should be addressed directly to the author.
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