Tag: CloudSwitch

Cloud deals arising from the fog

Ben Kolada

Contact: Ben Kolada

Going into the last day of the 9th Cloud Computing Expo, held in Santa Clara, California, we get the feeling that conference attendees will see an M&A shakeout within the next few years. To a degree, this dealmaking has already begun, with a small handful of exhibitors already having been scooped up, including a couple of firms that were acquired just last month. Meanwhile, the remaining vendors, most of whom are young startups, are scrapping to define and prove themselves for what they hope will someday be their own fruitful exits.

The cloud computing market is real and growing. My 451 Market Monitor colleagues, who have the tedious task of sizing the cloud market, estimate global cloud revenue (excluding SaaS) at $9.8 billion for 2011, with nearly 40% revenue growth expected in 2012. Many players in this sector have already taken note of its potential and acquirers’ interest, resulting in an increase in both deal sizes and deal volume for cloud vendors. According to The 451 M&A KnowledgeBase, so far this year a record 465 transactions claimed some aspect of cloud. That’s nearly double what we saw in the same period last year. (To be honest, many of these acquired companies are about as cloudy as snake oil, but there are real cloud deals being done. Platform Computing and Gluster, which both announced their sales last month, sold for an estimated combined deal value just shy of $450m.)

However, in terms of revenue, most of the cloud startups we spoke with haven’t yet really proven themselves commercially. But as these firms transition their focus from product development to marketing and sales, their growth will attract more and more suitors. And double-digit revenue isn’t exactly a requirement for a successful exit, as both the recent CloudSwitch and Cloud.com takeouts proved. Though we understand that none of these companies are looking to sell just yet, we wouldn’t be surprised if cloud-enablement providers such as OnApp, Abiquo and Nimbula are picked off one by one within the next few years. And we were reminded yet again that open source networking and routing vendor Vyatta could someday see a real offer from Dell, though the IT giant would likely face a competing bid from Cisco.

The emergence of convergence

Ben Kolada

Contact: Ben Kolada

The telecommunications and IT industries are increasingly converging, with Verizon Communications’ recent CloudSwitch acquisition perhaps the best example of a telco moving up the IT stack. But the CloudSwitch deal is just one example of a series of moves by telecom service providers to attack the $3bn cloud computing market. Other telcos – such as Interoute Communications with its recent Quantix buy – are merely gobbling up cloud vendors, and may be missing out on the industry’s full potential.

Somewhat IT ignorant, telecom service providers have understandably taken a cautious and hands-off approach to cloud computing. In fact, telcos that have announced the biggest deals so far have allowed their acquired properties to operate mostly autonomously, rather than fully integrate both companies in order to take advantage of their shared strengths.

To educate service providers on how to effectively move toward the cloud, tomorrow at 8am PST we will host a webinar titled ‘Telcos in the Cloud: Who’s Doing What With Whom, and Why?’ Antonio Piraino, vice president of Tier1 Research, will join me in discussing cloud strategies, partnerships and acquisitions that telcos are and should be employing to harness the cloud industry’s growth potential. Click here to register for this free one-hour webinar.

Verizon drives toward convergence with CloudSwitch buy

Ben Kolada

Contact: Ben Kolada, Antonio Piraino

True to its intentions of bolstering its cloud prowess and less than half a year after completing its Terremark Worldwide purchase, Verizon Communications has now acquired cloud onboarding provider CloudSwitch. The timing of the deal comes as a surprise – CloudSwitch was still in startup mode – but that only goes to show the strategic importance Verizon is placing on this technology. CloudSwitch provides a proprietary technology that helps Terremark onboard workloads from internal IT infrastructure to its cloud platform in a more seamless and non-reconfigurable way.

CloudSwitch is addressing the first hurdle faced by the cloud platform proposition – how does a company with an established IT practice even begin to consider transitioning to the cloud? ‘Bursting’ over to the cloud, and making it so that applications can shift seamlessly to the cloud without rewriting code, is a good start. Giving enterprise system administrators the ability to point and click through an entire datacenter migration project is highly attractive for operations staff to consider migrating to a cloud environment. Even though hybrid mixes of in-house and off-premises resources are expected to exist for quite some time, there is still a considerable opportunity for providers in the space.

My colleagues at Tier1 Research don’t believe that Verizon/Terremark is finished building on this enterprise cloud play. When it has developed the infrastructure (including onboarding and orchestration layers), they expect that it will continue to move further up the IT stack. And in this era of heavy M&A activity, there’s a fine line to be drawn between buying prior to proven maturity and possessing technology before your competition grabs it, making this a good investment for Verizon/Terremark.