Cloud Provider Commentary

Oct 31 2013   4:27PM GMT

Cloud providers pregaming Black Friday with M&A shopping spree

Jessica Scarpati Jessica Scarpati Profile: Jessica Scarpati

Holy market consolidation, Batman!

We’ve known for a while that the volume of cloud provider mergers and acquisitions (M&As) has been growing at a decent clip, but I was still surprised to see them come so fast and furious this week from three big providers. The reported deal values weren’t jaw-dropping (in all fairness, IBM set a pretty high bar with its $2 billion SoftLayer buy earlier this year), but they hint at some of the technologies and capabilities these providers don’t want to wait around for R&D to churn out:

  • NTT Communications to buy Virtela for $525 million. When I covered enterprise networking more closely a few years ago, Virtela was one of those companies whose business model I always found difficult to nail down (circa 2010: “Virtualized overlay cloud networking services? Uh, yes, I totally get it”). Over the years, though, the company has done a better job articulating its message while also benefiting from a broader market interest in alternative approaches to physical networks. NTT, which has been one of the most vocal carriers discussing its SDN strategy, says in a press release that it will upgrade its network with Virtela’s network functions virtualization to “virtualize the functions of customers’ network equipment, such as firewalls and WAN accelerators.” NTT plans to offer joint services with Virtela in 2014.
  • NTT drops $350 million for 80% stake in RagingWire Data Centers. Not so much a direct cloud play, but it definitely contributes to NTT’s cloud expansion. The deal more than doubles NTT’s data center space in the U.S. market, and it also includes RagingWire’s patented data center management tools, which NTT plans to roll out worldwide.
  • CSC to acquire ServiceMesh for an undisclosed sum (well, sort of). ServiceMesh is a cloud management vendor whose core product, Agility Platform, is aimed at simplifying and automating cloud resource deployment for enterprise customers. CSC didn’t publish the terms of the deal, but the folks at GeekWire tracked down a transcript of a conference call with analysts stating that the company paid $158 million in cash and will shell out up to an additional $137 million “based on the achievement of certain performance targets.” John Madden, practice leader of IT services research at Ovum, says the deal gives CSC the “capabilities to address two key elements that must be addressed as the cloud services market continues to grow: the ability to size, deploy, scale and manage hybrid cloud environments, and the need for enterprises to have proper cloud governance within their organizations.”
  • Internap plans to nab iWeb for $145 million. Atlanta-based cloud and IT services provider Internap Network Service Corp announced its intention to acquire iWeb, a Canadian service provider that offers cloud, colocation and hosting services.  In addition to expanding its geographic footprint, Internap says the deal will give it a stronger foothold in the SMB market for IaaS.

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