Read Arma’s view on how the continued shift towards companies storing data in the cloud has turned specialist providers that support the transition to public cloud into attractive acquisition targets, in full on Forbes here.
One of the most important drivers of cloud adoption has been the proliferation of data. In fact, half of the world’s data, amounting to approximately 100 zettabytes, is expected to be in the cloud by 2025.
Over the past decade, cloud computing has been on the rise. Despite initial worries around security, regulation and costs relating to outsourcing processing and storage needs, companies have continued to transition their operations into the cloud. This, in turn, has helped their digital transformation and adoption of digitally enabled business models. The process has been an important element in the growth of the digital economy, particularly as we see companies move from “on premise” storage towards outsourcing to private virtualised cloud and public cloud from major providers.
One of the most important drivers of this shift has been the proliferation of data. In fact, half of the world’s data, amounting to approximately 100 zettabytes, is expected to be in the cloud by 2025. In light of this remarkable expansion, cloud services have benefitted businesses by helping them to process, store and manage this data in a more efficient, secure and scalable way. This, in turn, prompted companies to pivot their business models to become more digital, spurring innovation and optimising operations in industries spanning from healthcare to finance.
Key players in the public cloud market are Amazon Web Services, Microsoft Azure and Google Cloud, which utilise offsite data centres across the world to provide storage and processing capacity for companies that use their services. However, from a deal activity perspective, it’s clear that Amazon, Microsoft and Google are too large to be realistic acquisition targets.
So what is fuelling high levels of M&A in this sector? In short, it is the acquisition of cloud service providers, namely companies that help businesses transition into the cloud.
So what is fuelling high levels of M&A in this sector? In short, it is the acquisition of cloud service providers, namely companies that help businesses transition into the cloud.
Fervent deal activity can be illustrated through, for example, IBM’s acquisition of Nordcloud, the leading European public cloud services provider, helping it to strengthen its hyperscaler services capabilities. It can also be seen in Cognizant’s acquisition of New Signature, one of the world’s largest independent Microsoft public cloud transformation specialists, in July 2020, helping it to deepen its expertise across the Microsoft cloud product suite.
Other major cloud deals include Content+Cloud being sold to Nordic technology services provider and Goldman Sachs Asset Management portfolio company, Advania, in December 2021, to increase, tailor and diversify the cloud offering the combined group could deliver to its clients, and Node4, one of the UK’s leading providers of cloud-led, digital transformation and managed services, receiving a majority investment from Providence Equity Partners in March 2021.
Furthermore, the need for an expert cloud workforce to maintain cloud operations once the transition to cloud has been made is another driver of deal activity. This has led to an increase in “acqui-hires”, the phenomenon involving companies acquiring other businesses for their workforce and the expertise of their personnel, amid a war for talent in the sector.
In the future, cloud experts will remain a valuable asset to businesses, especially as demand for services which help companies embrace digital transformation shows no signs of stopping. We can expect the M&A boom in this sector to continue, consolidating the position of cloud as a major player in the digital economy.