Whether it's solution providers looking to add cloud competency to their portfolios, like massive global integrator Dimension Data's acquisition of cloud infrastructure player OpSource, or a communications giant like Verizon nabbing a cloud software company like CloudSwitch, the pace of cloud consolidation could make your head spin.
Cloud solution providers see the break-neck mergers and acquisitions continuing as the cloud market continues to find its feet and computing giants look to round out their rosters with more cloud products and services.
"The key players are acquiring capabilities instead of companies," said John Shaw, CEO of New York-based Nimbo, a cloud solution provider.
And while Shaw said many solution providers aren't directly affected by the swift M&A activity, unless they're partnered with the acquirer or the acquired, it does change the market landscape.
Aric Bandy, CEO of Minneapolis-based cloud solution provider Agosto, agreed.
"There's a consolidation … It's a sign of the market maturing," he said, adding that cloud computing created a breeding ground for startups that were ripe for acquisition and large providers took note. It didn't take much to get up and running in the cloud.
"But in order to continue to grow you have to have a certain breadth, you have to have depth on your bench," Bandy added.
One of the biggest trends in cloud acquisition is traditional telecoms, carriers and cable companies spreading their cloud wings and scooping up cloud players, both established and up-and-coming. Verizon got the ball rolling when it bought Terremark for $1.4 billon, several months before the CloudSwitch buy. The charge was continued by Time Warner Cable, which bought cloud infrastructure player NaviSite shortly after. Then telecom giant CenturyLink added cloud provider Savvis to its roster through acquisition.
Major vendors, too, are taking note. Dell and IBM aside, HP bought Autonomy to raise its cloud profile and add information management capabilities. Salesforce.com has been on an acquisition hot streak, beefing up its cloud platforms and offerings. And Google has been on a non-stop buying spree.
Meanwhile, there are some cloud mainstays that have held pat saying they won't fall to acquisition. Rackspace has been vocal about not being for sale, and has gone to lengths to assure partners that it's not up on the auction block.
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On the heels of the Verizon and Time Warner cloud buys, Reuven Cohen, founder of cloud platform vendor Enomaly and cloud capacity clearinghouse SpotCloud, said that the recent string of cloud acquisitions were are harbinger for more to come.
"This will certainly drive consolidation within the cloud and infrastructure services market," Cohen said at the time. "For example I wouldn't be surprised if you see a few of the major hardware players branching out into the cloud service provider realm with some strategic acquisitions. The reason is simple, the desktop is dead. The main conduit for software has become the Internet. The line between software provider and infrastructure provider has quickly become blurred."
Bandy said major vendors and larger telecoms recognize that they can't build their entire cloud ecosystems and innovate solely in-house, and they are under pressure to launch new products, gain intelligence and foster greater integration capabilities.
"They're saying, 'In order for us to continue to compete we need to have this as an offering,'" Bandy said.
Kevin Price, CEO of Centennial, Colo.-based AccuCode, said the acquisition push is a bid to "remain relevant in the market" as it transitions. A host of companies are jockeying for cloud computing dollars and need to differentiate themselves.
"There's not going to be room in the market for that many," Price said. "Ultimately, you're going to end up with a lot of consolidation."
But Nimbo's Shaw said it's important to not acquire for the sake of acquiring, but instead ensure that it’s a strategic investment that will boost cloud capabilities.
"The big providers definitely have the cash," he said. "The main thing with the cloud is it's very disruptive. These providers are making these acquisitions to save business. In some cases it's an emotional play."
Regardless, Shaw said there's still room in the market for smaller players, and many may stave off acquisition and continue independently.
Next: VARs, Solution Providers Not Immune
And cloud solution providers themselves aren't immune to acquisition and consolidation. And some hope that they get swept up in the action.
Google cloud provider Cloud Sherpas is one solution provider that has gone on a cloud shopping spree of its own, scooping up three solution providers in recent months to expand its presence internationally and beef up its cloud presence. In June Cloud Sherpas acquired Omnetic, a San Francisco-based Google Apps solution provider. That was followed by Cloud Sherpas' buyout of Beloit Solutions Group, an Overland Park, Kan.-based cloud solution provider, which gives Cloud Sherpas and its Google offerings a foothold in the Microsoft-heavy Midwest. And in late July, Cloud Sherpas acquired New Zealand Google Apps reseller and cloud service provider WaveAdept, gaining a strong position in the Asia-Pacific region.
At the time of the WaveAdept acquisition, Cloud Sherpas founder and marketing vice president Michael Cohn said Cloud Sherpas had more potential acquisition targets in mind in 2011.
And Shaw said his company wouldn't be adverse to an acquisition if it creates more strategic opportunities.
Still, it is vendors fueling cloud consolidation as they look to capture the excitement that cloud computing is generating and capitalize on the market in transition. And it's a market that continuing to morph and shift, creating new opportunities.
Shaw said he sees the next wave of acquisition coming companies look to add more intelligence to their cloud computing ecosystems to extract more value from the cloud. HP's acquisition of Autonomy is a step in that direction. Shaw said processing data, business intelligence and more information is a pending trend.
"The next big wave that's coming is the third wave of cloud computing; taking the data and getting something out of it," Shaw said.
Meanwhile Agosto's Bandy said that the next wave will center on verticalization of clouds. And cloud consolidation will continue, but be driven heavily by emerging market trends.
"There will continue to be some consolidation and it will probably be market driven and more opportunistic," he said.