Posted by: Jessica Scarpati
cloud M&A, cloud trends, IBM, IDC, Oracle, SAP
Yes, yes, we know. Lies, damned lies and statistics. Still, this recent forecast from IDC (specifically, from its Asia/Pacific research division) caught my attention, as I’ve heard various analysts rattle off similar predictions here and there:
After five years of cloud hype, real examples of its business benefits are starting to present themselves. Cloud services and technologies are no longer simply used to replace aging or costly on-premises infrastructure and the scene will continue to evolve in the next few years.
However, in terms of the number of vendors in the market, IDC is of the view that about 30% of suppliers currently in the cloud market will be out of business by 2015 as it is a relatively new market with many players entering and leaving the playing field. Therefore, it is imperative for CIOs to ensure due diligence when selecting a cloud service provider.
It probably comes as no surprise that such a young market will experience some consolidation, but one out of three? Yikes.
I checked in with the analyst behind this research, Chris Morris — vice president of for Asia/Pacific cloud services and computing research and director of IDC’s regional services research — to see if this consolidation will be global or specific to APAC. Here are his thoughts:
You will find that this will be a universal phenomenon in the cloud business. Competition is very strong with the current market actually being relatively small. For a new start-up, generating cash-flow to support their start-up and R&D costs can be slow, especially in emerging markets where there is a more cautious approach to public cloud. For an existing ISV with existing revenue streams from traditional licenses, making the transition from license-based business models to a subscription-based can also be difficult, as they essentially have to cannibalize their own business to make the move.
So some will falter and fall from business causes, while others — those who pick a business niche based on either industry vertical or horizontal business process — will be ripe for acquisition by the likes of IBM, Oracle, SAP et al.
But those 30% which fall from view will likely be replaced by at least that many new entrants. So for the CIO and any vendor managing an ecosystem of partners, managing the market churn will be onerous.
Cloud providers, consider yourself on notice.
Image courtesy of ajc.com.