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Cloud Space Continues to See Consolidation in June

Anne Shields

Why the OpenStack Space Is a Hotbed for Acquisitions

(Continued from Prior Part)

Cloud space is seeing an increased number of acquisitions

As we have seen in the earlier part of the series, June 2015 has already turned out to be quite newsworthy for the cloud space with two major acquisitions in the OpenStack space from IBM and Cisco.

In May 2015, Verizon Communications (VZ) announced plans to acquire AOL (AOL) for $4.4 billion to provide Verizon with its video ad technology. Intel (INTC) also announced the addition of Altera to its portfolio to develop tailored, integrated offerings for the data center and IoT (Internet of Things) spaces. In January 2015, Datapipe, a hybrid IT solutions company acquired GoGrid, an IaaS provider.

As the above chart shows, the IDC (International Data Corporation) expects worldwide public IT cloud services spending to reach ~$108 billion by 2017. The focus is expected to shift from savings to innovation.

Legacy technology players are following acquisition route to boost their cloud offerings

The SMAC (social, mobile, analytics, and cloud) revolution has forced technology players to look for various avenues of growth in the rapidly changing environment. According to a survey by KPMG, opportunities in security, data, mobile, cloud, and analytics technologies are expected to drive tech industry mergers and acquisitions in 2015.

Microsoft (MSFT) offered $55 billion to acquire Salesforce (CRM) in May 2015. Salesforce leads the customer relationship management (or CRM) market. CRM is the largest component of the SaaS (or software-as-a-service) sector, which is the fastest-growing sector in the cloud computing space.

The business environment of the technology industry is changing rapidly. The current industry focus points include cloud, media, and mobile computing. Thus, companies are considering various avenues to maintain a competitive edge. Legacy technology players like IBM, Microsoft, and Oracle have thus spent billions of dollars in acquisitions to establish a strong hold in the cloud space. According to Aaron Levie, CEO and co-founder of Box, the consolidation in the cloud space will be an ongoing trend.

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