How M&A/Strategic Alliances would further increase Cloud rivalry between market leaders going forward?

Introduction

  1. Almost all companies of various sizes and revenues are changing their digital business models to respond to digital disruption.Hence most businesses are at different phases of their digital transformation process to improve the customer experience.
  2. Cloud services is of the biggest areas of disruption that companies are focusing on to reduce cost of their infrastructure.More companies are moving their applications to cloud.This increased demand in cloud adoption has increased competition among leading Cloud Infrastructure vendors to capture maximum market share from this rapidly increasing addressable market.
  3. Leading Cloud Infrastructure vendors currently that are dominating the market by revenues in Cloud are Amazon, Microsoft, Salesforce, SAP, Google and Oracle.All these leading vendors are trying to provide SAAS, PAAS & IAAS service offerings as part of their cloud offerings to increase their revenues.
  4. In order to respond to customer demands and to increase their share, leading Cloud infrastructure vendors are building their service offerings organically and at the same time are resorting to inorganic strategies like M&A, Strategic Alliances and Partnerships.

M&A activity to meet customer demand for Hybrid and Multi cloud

  1. Business are no longer interested to maintain all their applications and data in a single Public/ Private Cloud.More business are reviewing their IT infrastructure to plan on which of their applications they intend to lift and shift to cloud and which of the applications they like to have on-premise.In addition business enterprises are also looking at multi cloud and multi vendor strategies.They are interested to engage with different cloud vendors and choose the best of breed approach on applications/software/data they want to host on cloud.Hence cloud vendors are required to have capabilities in their platform to access business data from multiple applications that are housed in multi cloud environments at high speed to gather additional insights.IBM acquisition of Redhat was the first acquisition that focused on the need for vendors to focus on Hybrid and Multi cloud.
  2. Business do not want to spend money on integrating data from their different applications that are residing in multi cloud platforms.They expect the vendors to take care of this integration and optimize data residing in multi cloud platforms.
  3. So more vendors like AWS, Azure and Google cloud are open to provide options to customers to engage with more than one cloud and are supporting to integrate/ access data coming from multi cloud environments.
  4. M&A are also increasing done by the vendors to come up with additional service offerings for their business customers.Recent acquisitions of Google Looker and Salesforce Tableau reveals that the cloud vendors are looking to add more service offerings to their existing cloud infrastructure to provide value to customers.Google is an IAAS player that focus on storage of customer data by investing on data centers.Google acquired Looker because it wanted to integrate analytical capabilities in its Cloud offering that the customer can use to analyze their data in Google cloud.Previously, customers needed to invest in an additional analytics/BI application to do this activity.This combined offering from Google can act as an incentive for businesses to move their data to Google cloud.In addition, Google can also afford to provide these BI/ Analytics services at a minimal cost to capture additional market share.
  5. In case of Salesforce Tableau acquisition, Salesforce wanted to broaden its service offering from being only a leading SaaS provider. Tableau helps Salesforce in gaining complementary skills in data management and analyzing the data in Salesforce for the customers to generate additional insights.In addition, Salesforce would leverage Tableau to build industry specific analytics offerings to help gather domain specific insights.Salesforce is intending to build Supply chain analytics solutions for Manufacturing industry or Healthcare specific analytics to generate additional insights on Customer health.Again Salesforce is intending to provide these services to not only businesses on Cloud but also to businesses using on-premise applications.

Why there is an increase in Strategic Alliances among vendors?

  1. In order to respond to customer demands effectively, leading cloud vendors are forging alliances with each other to build service offerings that increase customer experience.This strategy shows that vendors are putting Customers first in providing services rather than be concerned on competition or to lose market share to their competitors.The biggest example here would Microsoft strategic alliance with Oracle.Microsoft is ranked 1st and Oracle 6th in Cloud vendors by revenue. Inspite of both these companies competing with each other to increase their market share in cloud, they have also established an alliance where Oracle autonomous database can be housed in Azure.Microsoft forecast a greater potential in Oracle Autonomous database and wishes to sell it along with Azure platform to businesses as an add on offering.

Focus on Customer Experience

  1. Customer experience is an area where majority of cloud vendors are looking to focus as the economy is changing from consumption led to experienced led.SAP acquisition of Qualtrics for a hefty valuation reinforces the importance given by the vendors on customer experience.The priority is no longer on delivering products but to generate positive experiences to customers around these products.

Data and its strategic importance to customers

  1. As more data is created, it becomes important to manage the data and analyze it to gain valuable insights which can used by the business to take decisions that improve customer experience.
  2. More data analytics solutions provided by vendors work very well in silos and do not work well when integrating with multiple applications.Companies are looking at centralized data warehouse applications as a single repository that collect data from all data sources, manage it and then are stored centrally.The data should be easy to be analyzed by an analytics platforms.Business expect all these activity to happen in cloud.
  3. To accommodate the above request, vendors are looking to move their data warehouse to cloud and deliver analytics solutions as a service.For instance, SAP has integrated data from all its applications and stored in a central data warehouse on cloud which enables customers using SAP applications to generate insights from its data.Then SAP also has an Analytics as a service offering where the analytics is embedded with application to analyze the data and give additional insights on the workflow and process.

Importance of Cybersecurity

  1. With more business ready to move their data and applications to cloud, security is a key issue for customers.Leading cloud vendors position their platforms as compliant to identify and prevent any security threats.This needs to be communicated in a language that is well understood by business leaders in the board.
  2. Going forward, vendors need to position their Cybersecurity offerings as not only to prevent threats but also as strategic tools to increase revenues and improve customer experiences.

Conclusion

  1. Cloud services market would continue to be in demand in near future due to high adoption by customers of all sizes to move their applications to cloud and to be ready for Digital transformation to respond to customer demands.
  2. To cater to increasing addressable market, cloud vendors are looking to improve their existing offerings either through organically or inorganic strategy by doing M&A/ Strategic Alliances.
  3. More acquisitions like Salesforce Tableau and Google Looker deals will happen in near future as cloud vendors look to integrate more service offerings in their existing platform.


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